How to Handle Time-Barred Debt
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How to deal with Time-Barred Debt
You aren’t able to sue for time-barred loans, however you still owe the debt.
Written by Sean Pyles Senior Writer | Personal finances, debt Sean Pyles leads podcasting at NerdWallet as the producer and host of NerdWallet’s «Smart Money» podcast. The show «Smart Money,» Sean talks with Nerds on the NerdWallet Content team to answer questions from listeners regarding their personal finances. With a focus on shrewd and practical money tips, Sean provides real-world guidance to help people improve their financial lives. Beyond answering listeners’ money concerns on «Smart Money,» Sean also interviews guests who are not part of NerdWallet and also creates special segments to explore topics like the racial inequality gap as well as how to get started investing and the background of college loans.
Before Sean lead podcasting at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His writing has been featured throughout the media including USA Today, The New York Times and elsewhere. When he’s not writing about personal finances, Sean can be found digging around his garden, taking runs , and taking his dog for long walks. Sean is located in Ocean Shores, Washington.
Aug 5, 2021
Edited by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Prior experience includes copy editing and news for several Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in mass communication and journalism from The University of Iowa.
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If a debt is more than the , it’s called time-barred debt. That means creditors don’t have a lawful right to bring a lawsuit against you for it, although they may attempt to sue. They may also pursue you in other ways, such as with telephone calls and negative credit reporting.
Be cautious, as debt collection has many pitfalls. There’s a chance that you did not pay this debt, that the collector is asking for the wrong amount or that you have already paid the debt and the collection is wrong.
There are a variety of options to deal with this. Each one has advantages and disadvantages, and you may want to seek from an expert who is familiar with the consumer laws in your area before you act.
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What can you do
If a debt collector contact you regarding the time-barred debt You can:
Challenge it.
Pay it off — But beware of » » (more on it below).
Discharge it by filing bankruptcy.
Do not ignore it.
A debt collector should notify you a notice within five days after first contacting you. The notice should state the amount owed, date of the last payment, the name of the collector is , and the best way to obtain information about the creditor who originally contacted you. If you don’t receive an email within 10 working days of when the first contact from the debt collector you, request it.
Challenge it
If you’re being requested to pay a time-barred loan which isn’t yours, was already paid off or is otherwise invalid, you can write the creditor to say you’re disputing the obligation.
You have 30 days from the first contact by the collector of debt to dispute the debt before it’s deemed as defaulted. If you dispute the debt within this window, debt collection efforts must be stopped until the problem is addressed.
You can still challenge the debt after the 30-day period, but the creditor will contact you to inquire about payments while your dispute is being investigated.
Be as specific as possible in your letter. Say the reason why the debt collection request isn’t legitimate, including details about the payment history, reasons why the debt might not be yours, and any other relevant information. It is best to mail the letter via certified mail to ensure you receive the confirmation that you received.
It is advisable to seek legal advice as the case is investigated, because the challenge process can be complex.
If you think the debt collector is in violation of laws, you can file a complaint with the the .
Pay it off Beware of resurrecting debt that is not paid off.
Paying off the debt can get you out of the collections misery, but be sure you can afford to pay the full amount, including the penalties and fees.
Though you may believe that making at the very least a small amount will get the creditor out of your way, the reality is that it can make things much worse instead. Making even one payment on a time-barred loan could be the lightning bolt that will bring it back to life and alters the statute of limitations.
«In the case of a debt that is time-barred, failing to make payments can be extremely damaging,» says Colin Hector, staff attorney at the FTC. «In certain states, if you pay a single amount, even if you pay $1 or $5, you’ve reactivated the [whole] debt and you can be sued for this debt plus charges. Consumers should be aware of the implications before they pay off a debt.»
If you do want to pay for it, you have several choices:
In full, pay with the lump sum.
Talk to the creditor about how to establish the payment arrangement.
Make a deal to settle the debt with an amount.
In full payment, you can take the debt out of your hands for good, but be sure you get the agreement in writing before you sign it. Keep the proof to ensure that the payment was properly recorded or the debt somehow gets sold to another collector.
You can also ask the debt collector to agree to accept a percentage of what you owe in settlement of the debt, but be careful. The debt might not be eliminated completely. If you don’t sign an agreement specifically stating that the partial payment will pay for the entire debt, the collector can sell the rest of what you owe to a different debt collection company — which can then be able to pursue you. The debt will also be categorized as a partial payment on your credit report, which won’t look good to potential creditor to come after you in the near future.
Whatever method you choose, be cautious: Get the contract in writing prior to when you pay the money. Be aware of all transactions and communications in the event that the creditor fails to adhere to the agreement. Written correspondence is the easiest to be documented; if you choose to make contact via phone, keep track of the date, time, and the name of the person you spoke with.
Discharge through bankruptcy
If you’d like to free yourself of this liability for good but can’t afford to pay it off then you may be able to make a claim for .
This will take the debt that is not paid from collections off your shoulders. But, the marks from the bankruptcy will replace it over the next few years. It is likely that you will after you file, though.
Don’t bother with it
If your debt is time-barred it is not possible to sue to pay it, but the debt will not go away. You may ignore the debt, but collectors and you won’t.
Most delinquent debts can remain on your credit report for up to seven and a half years. You’ll have a harder time getting new lines of credit and you’ll be charged higher interest rates.
Additionally, debt collectors may continue to pursue payments. If you ignore the debt for a long time you could risk the current collector selling you the debt again and then you’ll need to repeat the process over again with a new collector.
What do you do if accused of being sued
In addition to attempting to collect creditors may also take legal action even if the due date is over the statute of limitations.
The most important thingto remember: Don’t ignore such an instance of litigation. Ignoring it likely would result in an automatic judgement in your favor, and that may result in . Be attentive to any notices you receive, act swiftly and exercise your rights as a consumer.
You may want to consult with an attorney about the best way to proceed, and gather any documents that prove that the debt has been time-barred. If the case goes to court, you’ll need to present proof of the date of last payment as well as information regarding the charge. Simply declaring that the debt is not time-barred is enough to get the case thrown out.
It’s not allowed under the Fair Debt Collection Practices Act for a debt collector seek to sue you for the time-barred debt. Therefore, you may also file a complaint with the CFPB, the FTC and your state attorney general’s office.
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About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has appeared in The New York Times, USA Today and elsewhere.
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