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Special section Managing debts in collection

Be careful what you say if an old debt comes back from the grave. It could cost you.

Dealing with old debt
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While you're waiting for a debt collector to verify the debt, it's a good idea to do some research on your own. If one debt collector calls you about an old debt, you can bet another debt collector will try again in the future.

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You'll want to track down the statute of limitations for delinquent debt in your state. This chart from Bankrate.com is a good place to start.

For specific details, you'll need to contact a consumer attorney in your state or the consumer protection division in the office of your state's attorney general.

They'll be able to tell you the statute of limitations that applies to your overdue debt and whether a debt collector has the right to sue you for payment.

"If it's more than four years old, it's worth getting some legal advice on it," says Bob Hobbs, deputy director and attorney at the National Consumer Law Center.

To find an attorney near you, visit the Web site of the National Association of Consumer Advocates and search for an attorney with expertise in debt collection in your area. To find your state's attorney general, click here.

If your debt is beyond the statute of limitations in your state, simply write a letter to a debt collector and ask them not to contact you.

Exercise your rights
The Fair Debt Collection Practices Act gives you the right to cease contact with a debt collector and you may as well use it.

Make it clear in your letter that you're aware that the debt is "time-barred," and you can't be sued for the debt and you don't want to hear from them again.

What if a collection agency is calling you about an old debt you racked up while living in a different state? Which state's statute of limitations on delinquent debt should you refer to, the state in which you used to live or the state you live in now?

Looking to the statute of limitations in the state where you live now is a safe bet.

Creditors have two options when suing you over a delinquent debt. They can either sue you in the state where you live or sue in the state where the transaction took place. Most choose the state where you live now.

According to "Money Troubles: Legal Strategies to Cope With Your Debts":

The creditor usually selects the state where you live if it's different from where the transaction took place, because the court requires a substantial connection between you and the state in which you are sued.

That's why it's a good idea to use the statute of limitations in your home state as a guide when dealing with an old, old debt. If you have questions, be sure to consult a consumer attorney.

What if you want to pay back an old debt? Proceed with caution. Negotiating a payoff amount with a debt collector is no easy feat. This article from Bankrate.com will guide you through the steps.

And before you offer a debt collector a cent, take a close look at your budget.

No matter what a debt collector says, an unpaid credit card bill is not the most important bill you have to pay this month. Providing necessities for your family comes first. These 16 rules will help you prioritize your debts.

If after scrutinizing your finances you are able to pay a debt collector for an old debt, feel free to do so. Just be careful how you do it.

Offering a lump-sum payment may be the best way to go. Debt collectors want your money ASAP and they may be willing to settle your debt for a whole lot less if you agree to one big payment.

By offering a lump-sum payment, you could easily cut your debt in half.

Just be sure to get proof in writing that the new, lower payoff amount will satisfy your debt in full.

"You have to be very careful," says Peter Barry, a consumer rights trial lawyer in St. Paul, Minn. "You absolutely want to get something in writing that says 'If I pay this, this satisfies my debt.' Otherwise, you leave yourself open to be collected again on the debt."

If you can't make a debt collector a decent offer on an old debt, you may want to think twice about paying.

In some states, even a small payment of, say, $20, could re-start the statute of limitations on your debt. This will make your old debt new again.

The debt could be slapped back on your credit report as delinquent and a debt collector can sue or threaten to sue you all over again.

The advantage swings back to the debt collector.

Dana Dratch and Bankrate editorial assistant Sheyna Steiner contributed to this story.

Create a news alert for "debt" -- Updated: Aug. 22, 2006
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