The United States has comprehensive set of rules and laws to protect debtors from harassment from debt collectors. These laws come under the Fair Debt Collection Practices Act. While that Act has enough provisions to see to it that you are not harassed, there is one more rule in the books of law that you must be aware of. The debt collection statute of limitations refers to the period elapsed since your last activity on a debt after which a debt collector may no longer try to make you repay your debt.
Let us take an imaginary case study. Mrs. Z has a debt of $50,000 to be paid to the creditor X. The debt has long gone delinquent and X has tried all possible legitimate means to make Mrs. Z pay up. Mrs. Z’s credit report shows that there has been no activity around that debt for the past seven years. X, being fed up of trying to make Mrs. Z pay, files a lawsuit against Mrs. Z. In the court, X wants a judgment that will compel Mrs. Z to pay up. Luckily, Mrs. Z is aware that in her state the debt collection statute of limitations is six years from the last activity on the credit report. She uses this fact, along with relevant evidence against X and wins the case. Now the creditor X may no longer attempt to collect that delinquent debt.
From the above anecdote
There are a few important things to know about debt collection statute of limitations:
1. Time: Different states have different debt collection statute of limitations. Some states have it as three years while some have upwards of a decade. The best way to find out the case in your state is to contact the State Attorney General’s office. Especially if you are going to use the statute of limitations in court, be sure you know the law.
2. Ownership of the debt: Just because sufficient time has elapsed between your last activity on the debt and the court has ruled in your favor does not necessarily mean that your debt has been written off. You still owe that money and it will reflect in your credit report.
3. Credit reporting: Debt that may no longer be collected because the debt collection statute of limitations has elapsed will still reflect in your credit report for up to seven years. To know more about fair credit reporting, consult this link from the Federal Trade Commission’s website: https://www.ftc.gov/news-events/topics/consumer-finance/credit-reporting
Don’t be caught unawares
Debt collectors often exploit the debtors’ ignorance of the debt collection statute of limitations and keep pressing for debt recollection. The idea behind it is that someone who doesn’t know her/his rights will invariably cave in to constant pressure. Many debt collectors will threaten you, something you should not put up with under the Debt Collection Practices Act. They may even press a lawsuit to keep up the pressure. If you are aware of your state’s statute of limitations, you can go to court and prove it.
But no matter what you do, always beware that any activity regarding your debt will start the count from zero and then the statute of limitations will not be effective in court. If you think you are on the right side of the law, do not promise debt repayment to the debt collector since it may reflect as activity on your credit report and you may have to wait another five or ten years for the statute of limitations to pass!
Lastly, if you have successfully used the debt collection statute of limitations against your creditor in court to contest unlawful collection efforts, cover your bases by ensuring that you are not subject to future collection efforts. Get a written communiqué from your debt collector or creditor stating that they will stop all efforts to collect debt from you thereafter. To know more about time-barred debts and their collection, consult this link on the Federal Trade Commission’s website: https://consumer.ftc.gov/articles/debt-collection-faqs