Here’s how to avoid common missteps that can summon an old debt back to haunt you.

3 minute read

Just when you thought that ancient debt was out of your life for good, here it comes again. This time, in a letter from a collection agency claiming you need to pay up. But do you really have to pay a debt that’s several years old? That depends.

The debt may be “time-barred” under your state statute of limitations, which means that you’re not legally required to pay it. Unfortunately, however, it’s easy to unwittingly restart the clock on a time-barred debt. And once you do, you’re legally required to pay that debt.

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1. Acknowledging that you owe the debt

When you receive a letter from a collection agency about a debt from years ago, you may want to call the agency and acknowledge that you owe the debt. However, don’t rush to fess up to that debt just yet.

Acknowledging the debt in writing or even over the phone that you owe the debt could start the clock ticking all over again, even if the debt previously fell outside the statute of limitations.

Find out: 5 Ways to Handle Old Debt

2. Failing to verify the debt

You have 30 days after receiving the first letter from a collection agency to ask for verification of the debt and request what’s known as a “debt validation notice” in writing.

Once the agency receives your written debt validation request, it must respond in writing within five days with the amount of the debt and the name of the creditor owed.

Once you have this information, check your records for the date of your last payment on the debt to determine whether it is time-barred.

Find out: 6 Consumer Rights to Know About Debt Collection

3. Not knowing the statute of limitations

Statute of limitation laws on debt vary by state and average three to six years. However, the statute of limitations for credit card debt in some states may be as long as ten years, according to the Federal Trade Commission (FTC).

If your debt falls outside of the statute of limitations, the collection agency is still allowed to pursue payment, but you have no legal obligation to pay the debt. To find out your state statute of limitations, contact your state attorney general’s office.

Find out: How to File a Complaint Against a Debt Collection Agency

4. Making a payment

Collection agencies in most states can still contact you about a time-barred debt, even if they can’t force you to pay. Some collectors may even pressure you to send at least partial payment.

While sending $20 may seem like a good way to get the collector off your back for a little while, if you make any payment – even $1 – you could restart the statute of limitations from the date of your most recent payment and again be held responsible for the debt.

Don’t make any payments until you find out whether the debt is time-barred. If the statute of limitations from the time you made your last payment has expired, you aren’t legally required to pay the debt.

Find out: Real Facts on How Debt Collection Works

5. Setting up a payment plan

If you agree to a payment plan with a collection agency before you learn that the debt is time-barred, you will legally be back on the hook for the debt.

Just like making a partial payment resets the beginning date for the statute of limitations, so does agreeing to a payment plan on a debt that was previously outside the statute of limitations.

6. Accepting a settlement

You may be so eager to get an old debt out of your life that you agree to a settlement with the collection agency. But accepting a settlement on a time-barred debt restarts the date of the debt, causing it to now fall within the statute of limitations.

Once the debt is within the statute of limitations, it’s no longer time-barred, and you must legally pay it.

7. Ignoring a court summons

Even if your debt is time-barred, in most states a collector can still try to sue for the amount owed. If the collector files a lawsuit, even though you aren’t legally required to pay the debt, it’s imperative that you show up for court with the statute of limitations as your defense.

Consider talking to any attorney and bring the debt validation letter you received or other evidence that shows the date of your last payment on the debt to court, recommends the FTC. If the judge decides the debt is time-barred, the case will be dismissed.

“In any case, don’t ignore the lawsuit,” warns the FTC. “If you do, the collector likely will get a court judgment against you and possibly take money from your paycheck, bank account or tax refund.

Find out: How to Answer a Civil Summons for Credit Card Debt

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC