Bad debt time limits. What’s the truth?

Have you ever heard of the FTC? Do you know who they are or what they do? The FTC (Federal Trade Commission) offers consumer advice which you know you can trust. The reason for the FTC is to police activities of businesses which has offerings for consumers. There is no question whether their advice is sound or if we can trust what they are publishing, so when I have a question as a Certified Credit Counselor/Certified Financial Counselor who has been helping consumers for 10 years, I often go to them for answers. I also visit the the CFPB often, but that’s for another post ;0).

Many clients over the years have asked me, “Isn’t it true my old debts fall off after 7 years?” My typically reply is “not exactly”. With how often I receive questions about this subject, I figured this is a great topic for a post today.

There are a few things to know about this. One is that the ‘7 year mark’ is not always 7 years, that ‘mark’ is dependent on the type of debt, the state laws of where the debt was contracted and where you live as well as a few other specifics. Another thing to know is that the ‘mark’ is dated from the last date of activity and many things can be considered ‘activity’, for the collector to update their date of activity. Next important thing to know is it doesn’t “fall off” once it hits that ‘mark’ whatever that mark may be for your specific debt, contract, law, state of origin, and creditor. One last thing to know before you read the entire article is that in the industry it is sometimes called a “time-barred’ debt, again because it doesn’t necessarily disappear.

Here’s what the FTC has to say about this subject specifically. (https://consumer.ftc.gov/articles/debt-collection-faqs#debts , paragraph 18 and beyond). This article also discusses; what to know about debt collection, what to do if you feel harassed. It’s a great article so I highly suggest you follow the link to read the article in it’s entirety.

“What To Know About Old Debts

What if my debt is old?

Debt doesn’t usually go away, but debt collectors do have a limited amount of time to sue you to collect on a debt. This time period is called the “statute of limitations,” and it usually starts when you miss a payment on a debt. After the statute of limitations runs out, your unpaid debt is considered to be “time-barred.”

If a debt is time-barred, a debt collector can no longer sue you to collect it. In fact, it’s against the law for a debt collector to sue you for not paying a debt that’s time-barred. If you do get sued for a time-barred debt, tell the judge that the statute of limitations has run out.

How long the statute of limitations lasts depends on what kind of debt it is and the law in your state — or the state specified in your credit contract or agreement creating the debt.

Also, under the laws of some states, if you make a payment or even acknowledge in writing that you owe the debt, the clock resets and a new statute of limitations period begins. In that case, your debt isn’t time-barred anymore.

Can a debt collector contact me about a time-barred debt?

Sometimes. It depends on which state you live in. Some state laws say it’s illegal for a debt collector to contact you about a time-barred debt. But even if you live in a state where a collector may still contact you, they cannot sue or threaten to sue you over a time-barred debt.

If you’re in a state where a debt collector can still contact you about a time-barred debt, they can keep contacting you by phone, email, or letter to try to collect what you owe. If you want to stop a collector from contacting you, send your request by mail.

If you live in a state where a debt collector can’t contact you about a time-barred debt — and they reach out to you — report it.”