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How to Handle Time-barred Debt

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How to deal with Time-barred Debt

You can’t be sued for time-barred debts, but you still owe it.

by Sean Pyles Senior Writer | Personal finances and financial debt Sean Pyles leads podcasting at NerdWallet as the producer and host of the NerdWallet’s «Smart Money» podcast. The show «Smart Money,» Sean talks with Nerds on NerdWallet’s NerdWallet Content team to answer listeners’ personal finance questions. With a focus on shrewd and actionable money advice, Sean provides real-world guidance to help people improve the financial situation of their lives. Beyond answering listeners’ money questions on «Smart Money,» Sean also interviews guests who are not part of NerdWallet and creates special segments to explore topics like the racial wealth gap, how to start investing and the history for student loans.

Before Sean was the host of podcasts at NerdWallet, he covered topics concerning consumer debt. His writings have appeared on USA Today, The New York Times as well as other publications. When Sean isn’t writing about personal finance, Sean can be found digging around his garden, taking runs , and taking his dog for long walks. He is based within Ocean Shores, Washington.

Aug 5, 2021

Editor: Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. Prior to joining NerdWallet, she worked for 18 years working at The Oregonian in Portland in positions such as copy desk chief and team director of design and editing. Previous experience included news and copy editing at several Southern California newspapers, including the Los Angeles Times. She received a bachelor’s degree in mass communication and journalism from the University of Iowa.

The majority or all of the items featured on this page come from our partners, who pay us. This influences which products we write about and the location and manner in which the product appears on a page. However, this does not affect our opinions. Our opinions are our own. Here’s a list of and .

When a debt is older than the original, it’s known as time-barred debt. That means creditors don’t have a lawful right to bring a lawsuit against you over it, though may still attempt to sue you. They may also pursue you in other ways, like phone calls and negative credit reports.

Take care, as debt collection has many pitfalls. There’s a good chance that you did not pay this debt, or that the collector is requesting the wrong amount, or that you already paid and the collection is in error.

You have a few methods to address this. Each option has its advantages and drawbacks, and you might want to talk to a professional versed in the laws governing consumers in your local area prior to taking any action.

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What can you do

If a debt collector calls you regarding a time-barred debt You can:

Challenge it.

Make it pay off Beware to beware » » (more about this below).

It can be discharged through bankruptcy.

Do not ignore it.

A debt collector should send you a within five days after first contacting you. The notice should state the amount due, the date of the last payment, who the debt collector is, and how to inquire about the creditor who originally contacted you. If you don’t receive the notice in 10 days after the first time the debt collector contacts you, ask for it.

Challenge it

If you’re asked to pay a time-barred loan that isn’t yours, was already paid off or otherwise invalid, you can contact the creditor and inform them that you’re disputing the creditor’s claim.

You have 30 days from the initial contact with the collector of debt to contest the debt before it is as defaulted. If you dispute the debt within the timeframe, debt collection efforts must stop until the issue is resolved.

You can still challenge the debt following the 30-day period, but the collector will contact you to inquire about payment while your dispute is being looked into.

Be as specific as possible in your letter. Explain why the debt collection attempt is not valid, including information about payment history or the reason why the debt could not be yours and any other pertinent information. It is recommended to mail the letter via certified mail to get proof of delivery.

You may want to seek legal counsel while the case is being investigated, because the challenge process is often a bit complicated.

If you think the debt collector is breaking the law, you may also file a complaint with the or the .

Make it payoff Beware of reviving debt that is not paid off.

Repaying the debt could save you from collection saga, but make sure that you are able to pay the full amount, which includes any penalties or fees.

Though you may believe that making at least a tiny amount can get the debtor away from your shoulders, this can create a worse situation. Making even one payment on time-barred debt can be the lightning bolt that brings it back from the dead and resets the time limit for repayment.

«In the context of debt that is time-barred, failing to make a payment can be devastating,» says Colin Hector, staff attorney of the FTC. «In certain states where you can make one payment even if you only make a payment of $1 or $5 in one go, you’ve activated the wholedebt, and can be sued for the debt and the associated costs. The consumer should be aware what the consequences are before they pay a debt.»

If you’re looking to pay, you have a few options:

Pay in full with the lump sum.

Contact the creditor to create a payment plan.

Make a deal to settle the debt with part of the amount.

Paying in full can get the debt off your back for good, however, make sure you get the agreement in writing prior to signing it. Make sure you have this document to ensure that the payment was properly recorded or the debt somehow gets sold again to another collector.

It is also possible to convince the collector to accept a percentage of what you owe in settlement of the credit, but you must be aware. The debt may not be eliminated completely. If you don’t sign an agreement specifically stating that the partial payment will be sufficient to cover the entire debt, the collector could sell the remaining amount you owe to another company for collection that can come after you. In addition, the debt could be categorized as a partial payment on your credit report which will not look great to prospective lenders later on.

No matter what method you choose, be careful: get the contract in writing prior to when you hand over money. Keep track of your transactions and communications in the event that the creditor doesn’t stick to the deal. Written correspondence is the easiest to be tracked; if you decide to communicate by phone, record the time, the date as well as the phone number of the individual who you spoke to.

The bankruptcy discharge process allows for discharge

If you’d like to free yourself of this obligation and for good but don’t have the money to pay for it, you could make a claim for .

The unpaid debt is now in collections off your hands. However, the mark from the bankruptcy will replace it for the next several years. You are likely to when you file bankruptcy, however.

Don’t bother with it

If your debt is time-barred it is not possible to sue to pay it, but the debt doesn’t disappear. You can ignore it, but debt collectors will not.

Most of the time, delinquent loans can stay on your credit reports for up to seven and half years. You’ll have a harder time getting new lines of credit and you’ll be charged more expensive interest rates.

Additionally, debt collectors may continue to pursue payments. If you don’t pay the debt long enough, you risk the current collector selling the debt once more and then you’ll need to go through the cycle over again with a new collector.

What should you do if you’re accused of being sued

In addition to trying to get payment creditors may also sue you even though a credit is beyond its time limit.

The most important thing: Avoid ignoring an action. If you ignore it, it could result in an automatic judgement on your behalf, that may mean . Pay attention to any notices you receive, act quickly and assert your consumer rights.

You may want to consult with an attorney regarding how to proceed, and gather all documents you have proving that the debt has been time-barred. If the case goes to court, you’ll need to submit evidence of the date of last payment along with information about the debt. Simply declaring that the debt is barred from being repaid in time should be enough to get the case dismissed.

It is against the Fair Debt Collection Practices Act to allow a debt collector to pursue you over the time-barred debt. Therefore, you may make a complaint to the CFPB and 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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