Does Your Debt Have an Expiration Date?

Americans are shackled by $13.7 trillion in consumer debt. From auto loans to store credit cards and mortgages, the financial situations of many families keep them bound to steep monthly payments that prevent them from contributing to rainy day funds, investing, and pursuing other avenues for financial growth. For some, debt can be an ongoing burden that never seems to have an end. It’s expensive, too, because those who make minimum monthly payments are subject to exorbitant interest rates.

If you’ve owed a debt to a credit institution or lender for several years, you might be wondering whether your debt will ever expire. It’s possible that this is the case, but it all depends on several factors. Before continuing to make payments on years-old debt, understand how the clock runs out on debt.

How Long Does it Take for Debt to Expire?

Different states have different statutes of limitations, which dictate the amount of time debt collectors have to take legal action against you over a debt. The statute of limitations begins after the last payment you made. Typically, the statute of limitations lasts between 4-6 years after your most recent payment to a collector. So, while your debt might be 6 or more years old, if you made a payment last year, the collection agency may keep trying to pursue payment and maintains the right to take you to court over that debt.

Some states forbid debt collectors from pursuing debt that is past the statute of limitations. Other states allow collectors to attempt to collect the debt but only by making phone calls and written payment requests. If the statute of limitations is 4 years in your state and you haven’t made a payment toward your debt in that time, the law prohibits collectors from suing or threatening to sue you over the amount you owe.

Avoid Restarting the Clock on Your Debt

If your debt is very old, it’s possible a debt buyer purchased it from the original creditor or lender. Debt buyers purchase old debts for a fraction of their original value and attempt to collect them. In some cases, debt buyers take borrowers to court in the hope of obtaining a judgment. A judgment gives a debt collector more power to recover the debt, such as access to your bank account or the ability to garnish your wages. Wage garnishment allows for a percentage of your salary to be instantly deposited to the debt collector when you receive a paycheck.

You can avoid restarting the clock on your debt by being informed. Ask the debt collector if your debt is time-barred and avoid providing any information that can be interpreted as an acknowledgment on your part about the validity of the debt. Do not confirm that you owe the debt and don’t agree to repay it. Doing so will restart the statute of limitations.

Old Debt On Your Credit Report

It’s important to note that even if your debt is past the statute of limitations and the creditor cannot take you to court, they can still report the negative information on your credit report.  Negative reporting on a credit report lasts seven years.  When reviewing old unpaid debts on your credit report you can usually find the date when the negative reporting will end, and the debt will drop off your credit report.  It should be seven years from the first missed payment and will be a seven-year reporting period of nonpayment.  This date is important to know if you intend to apply for new lines of credit.

Steps to Take When Being Contacted About Old Debt

Under the Fair Debt Collection Practices Act, consumers have rights and debt collectors are barred from employing a number of unfair tactics to push them into paying their debts. If a collector contacts you about a debt that’s past the statute of limitations, you may ask them to send you a written notice of the debt.

This written notice should include facts about the debt, such as:

  • How much you owe
  • The name of the creditor
  • Actions you can take if you don’t believe you owe the debt

Next, you should request a validation of the debt. You have 30 days to mail your request for validation to the creditor along with a certified letter. You should also contact a consumer law attorney to confirm the statute of limitations. Finally, you may choose to pay or settle the debt, or request that the collector quit contacting you. An attorney can help you make the right choice.

Trust McCarthy Law PLC to Help You Get Out of Debt

If you’re looking for ways to reduce your monthly payments or stop receiving collection calls on expired debts, it makes sense to work with a knowledgeable debt settlement lawyer. Attorneys with McCarthy Law PLC have years of collective experience protecting consumers’ rights and negotiating with creditors and lenders for fair payment plans. You can trust our firm to provide competent legal counsel that will make battling your debt a much easier process.

When you need representation against cunning debt collectors, don’t hesitate to seek a free consultation with our firm. Call 855-976-5777 or complete our contact form to get started on the path to financial freedom.

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Garrett F. Charity

Garrett F. Charity

Garrett F. Charity is Lead Attorney in the McCarthy Law PLC Los Angeles, California office and a member of the California Bar. He received his Bachelor of Arts Degree in Art History from Princeton University and his Juris Doctor Degree from Southwestern University School of Law where he was a recipient of the Schumacher Scholarship.