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Don't let an old debt come back to haunt you.
Some debt collectors are unearthing old debts, debts
that are five to 10 years old or more, in the hope of squeezing
some money out of unsuspecting consumers.
"I had one guy who got a call on a debt 14 years
later," says Gerri Detweiler, author of "The Ultimate
Credit Handbook."
A collection call on an old debt can be tricky to
handle, and if you handle it wrong it could lead to big trouble
down the road.
First, it's important to realize that an old unpaid
debt can't hurt you nearly as much as a new unpaid debt.
An unpaid credit account will mar your credit report
for seven years. But once your debt passes the seven-year mark,
you're in the clear.
You are at risk of being sued for
your newer debts anytime up until the last minute
of the statute of limitations. With an older debt,
any debt collector that threatens to take you to
court is breaking the law.
That's quite a difference and it all hinges on whether
the debt a collector is haranguing you about is beyond the statute
of limitations for delinquent debt in your state.
Once a debt is older than the statute of limitations
for debt in your state, a debt collector no longer has the right
to sue you for payment. You may still have a moral obligation to
pay back the debt, but you can't be sued over it.
"They can still ask you to pay,
but they can't threaten to sue. If they do, it's
a violation of the Fair Debt Collection Practices
Act," says John Ventura, a consumer attorney
in Brownsville, Texas, and author of the e-book
"Stop
Debt Collectors Cold."
Let's say you still owe some money
on an old credit card account left over from your
college days, 10 years earlier. Since the debt is
more than 7 years old, it's no longer listed on
your credit report. And let's say the statute of
limitations for credit card accounts in your state
is five years.
A debt collector may call you and ask you for payment
for this forgotten account, but he can't take you to court or threaten
to sue you over it. If he does, he's violating the Fair
Debt Collection Practices Act.
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Watch your step
Even though a debt collector won't ever admit it,
you're the one with the advantage here. But one little misstep could
change all that.
In some states, making a partial payment to a debt
collector or even acknowledging that you owe the money is enough
to make an old debt new again.
If this happens, the five-year statute of limitations
on your debt starts all over again. A debt collector has five more
years in which to sue you for payment. And a non-payment on your
new-again debt could be reported on your credit report. Then the
advantage transfers to debt collectors.
The best way to handle a collection call for an old
debt is to say as little as possible. Don't agree to pay. Don't
acknowledge the debt.
In her book, "Money Troubles: Legal Strategies
to Cope With Your Debts," attorney Robin Leonard offers the
following advice:
"You should never talk to the collection agency
about it at all, even if they call at a permitted hour of the day.
Just hang up the phone or put the receiver down and walk away."
The best way to respond to a collection notice on
an old debt is in writing.
Know the law
Under the law, a debt collector must
send you a written notice telling you the amount
of money you owe and the name of the creditor. If
within 30 days of receiving this collection notice
you write a letter back disputing the debt, a debt
collector may not contact you again until they can
verify the debt..
It's a good idea to send this letter via certified
mail so you'll have proof that the debt collector received it. Under
the law, a collector may only renew collection activities if proof
of the debt, such as a copy of a bill, is sent to you.
"Definitely seek a verification," says Mary
Fons, a consumer protection attorney in Stoughton, Wis. "If
they can't prove it, you don't pay it."
Old debt gets passed back and forth so often by debt
collectors that there's a good chance some account records, including
yours, could be lost.
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