How long can a debt collector pursue old debt?

Pekic/Getty Images: Illustration by Issiah Davis/Bankrate

Debt collectors can pursue old debts even after they expire. However, consumer protections limit how and when debt collectors can contact you. Notably, each state has statutes of limitations, which restrict the amount of time debt collectors have to sue a borrower for nonpayment.

Once this period expires, debt collectors lose the legal right to take you to court over the debt, and you can formally request that they stop contacting you about the expired debt.

However, expired debts may still negatively impact your credit score even after debt collectors have complied with your request to stop contacting you.

Understanding your consumer rights, the statute of limitations and the credit score impact of expired debts can help you make informed decisions about handling debt collectors who attempt to collect on old debts.

The statute of limitations on debt collection

The statute of limitations is a law that limits how long debt collectors can legally sue consumers for unpaid debt. The statute of limitations on debt varies by state and type of debt, ranging from two years to 20 years. Once the statute of limitations has expired, the debt is said to be “time-barred.”

Debt collectors cannot sue (or threaten to sue) to collect old debts after the statute of limitations has expired. However, they can still attempt to collect on these time-barred debts through other means, such as phone calls or letters. Debt collectors are not allowed to call you after 9 p.m. or before 8 a.m. and are not allowed to call your workplace if you have told them verbally or in writing that your employer does not allow such calls.

Statute of limitations on debt collection by state

Below is an interactive map of each state’s statute of limitations on four different types of debt:

• Written contracts are debts associated with agreements made in writing (including informal agreements scribbled on scraps of paper).
• Oral contracts are debts for which no written contract was created, but verbal promises of repayment were made.
• Promissory notes are financial instruments that define the number of payments to be made, the timing of those payments and the applicable interest rates (common for mortgages, student loans, personal loans and other formal debt arrangements).
• Open-ended accounts are revolving lines of credit. This means you can borrow against the limit, repay the amount plus interest and borrow from the same account again (as with credit cards or HELOCs).

Be aware that creditors may argue in court that the law in their state should apply instead of the law in your state. Some credit agreements include a “choice of law” clause, specifying that the laws of a particular state (typically the creditor’s home state) will govern the contract. The court may honor this clause if the selected state has a reasonable connection to the contract and the clause does not conflict with the public policy of the borrower’s home state.

Important: Case law and state regulations on statutes of limitation are always evolving and often have more nuance than can be displayed in a single table. For this reason, it’s always best to consult with an attorney in your state to understand which statutes of limitation, if any, apply to your situation.

What to do when collectors contact you after the time limit expires

If a debt collector contacts you after the statute of limitations on your debt has expired, do not immediately claim responsibility for whatever they say you owe. Do not attempt to negotiate with the collector or make any payment on the debt in question.

There are multiple reasons to avoid accepting responsibility for the debt:

• The debt collector could be mistaken about the amount or timing of your debt, especially if the debt has passed from one collection agency to another.
• In some cases, claiming the debt can reset the statute of limitations, making it legal again for debt collectors to sue for the amount owed.
• The person contacting you could be a debt collection scammer. You could be speaking to a fake debt collector, attempting to make you pay money you don’t owe.

Instead of engaging with the person contacting you, the Federal Trade Commission recommends telling the debt collector that you won’t discuss any debts until you receive your written validation notice. This notice includes the name of the original creditor and the amount owed, as well as your rights under the federal Fair Debt Collection Practices Act (FDCPA). Debt collectors are required to provide you with this written notice within five days of first contacting you about a debt.

Upon receipt of the validation notice, you can review the information about the debt for accuracy and decide how to proceed.

Options for handling valid time-barred debt

If the old debt a collector contacts you about is valid, you have a few options:

• Dispute the debt if there are errors: If you find inaccuracies in the validation notice, you have the right to dispute the debt in writing within 30 days. The collector must then verify the debt before continuing collection efforts.
• Refuse to pay: If the debt is beyond the statute of limitations in your state, you are not legally obligated to pay it. You can send the debt collector a cease-and-desist letter stating that you do not intend to pay the debt. This doesn’t erase the debt or remove it from your credit report (where it can remain for seven years), but it can stop further communication under the FDCPA.
• Pay the debt in full or negotiate a settlement: If you have the means and want to clear the debt, you can choose to pay it off. Alternatively, you can negotiate a reduced lump-sum settlement with the collector. Neither payment nor settlement guarantees your credit score will increase.
• If you’re being sued over a debt outside of its statute of limitations, you may need to appear in court and prove that the debt is too old to collect. Failure to appear in court to defend your case could cause a judge to rule in favor of the debt collector.

If you’re unsure about your rights as a consumer or the potential impact of each option on your credit score and finances, consider consulting with a consumer attorney or financial advisor. They can help you navigate the situation without unintentionally resetting the statute of limitations.

The bottom line

Debt collectors can continue to pursue old debt even after the statute of limitations has expired and they can no longer threaten legal action. However, once the statute of limitations has expired, you can send a cease-and-desist letter to the debt collector to order them to stop contacting you.

If a debt collector contacts you, it’s important to take the time to confirm that the debt is yours, the amount due is correct, the debt collector is legitimate and the relevant statute of limitations has not expired.

Understanding your rights within the debt collection process, including when, where and how frequently debt collectors can contact you, can help you decide how best to resolve old debts. Before making any payment on an expired debt, consult with a financial advisor or consumer law attorney to discuss your options and their potential impact on your long-term finances and credit score.

Frequently asked questions

• How does debt collection work?
  

  Generally, the earliest phases of the debt collection process begin around 30 days after a payment’s due date has passed and payment has not been made. This is the point at which the debt is marked as delinquent. You may start to receive calls or notices from the creditor at this point, but debt collection activities may escalate if the creditor can’t reach you.

  Later in the process, often around 180 days after the original due date of the payment, the creditor might sell the debt to a collection agency if the creditor decides it is not worth their time to continue attempting to collect. At this point, you’ll likely start to hear from the debt collector. Neither the debt nor the payment has changed, but another entity, the debt collector, now has the right to pursue payment.

• Can debt collectors sue you?
  

  Yes, debt collectors can sue for payment anytime before the statute of limitation expires. Typically, debt collectors will only pursue legal action for amounts over $5,000, but they can sue for less.

  If a judge rules in the debt collector’s favor, you may be ordered to pay by court judgment. Any court judgments will be added to your credit report and remain there for seven years, even if you pay the judgment. If you discover that you have a judgment against you, it’s a good idea to speak with a consumer law attorney to determine your rights and whether you can get the judgment removed.

• Should you pay your debts after the statute of limitations has expired?
  

  Some people argue that once a debt is no longer within the statute of limitations, it doesn’t need to be paid off. Others feel a moral obligation to pay off all of their outstanding debts. There are also credit score impacts to consider.

  “If you don’t make payments on your debt, it can still affect your credit for up to seven years, regardless of when the statute of limitations ends,” says Katie Ross, executive vice president of American Consumer Credit Counseling. After seven years, most unpaid and delinquent debt disappears from your credit report, at which point it will no longer impact your credit score.

  Ross suggests devising a repayment plan. But remember, if you start making payments again on old debt, the clock on the statute of limitations starts anew, opening you up to being sued for the money owed.