Debt dismissed in bankruptcy uncollectible

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

Dear Bankruptcy Adviser,
Can a debt that was discharged in bankruptcy over 20 years ago be collected on? I noticed on my credit report recently that a company whose debt was discharged in 1982 has made a report on that same account and indicated it was delinquent. Is this legal? How can a discharged debt be resurrected?
— Dora

Dear Dora,
It appears that someone is trying to shake you down for money based on your limited legal expertise. You must be very careful, however, because a collection agency that is trying to collect on 20-year-old debt is likely to try to slip a judgment past you without your knowledge.

This is called “gutter-service,” where the collection agency files a lawsuit, never serves you because the process server literally throws the lawsuit papers into the gutter, gets the judgment and tries to collect on it years later, when it is impossible or very difficult for you to overturn.

By this point, your debt has not only been wiped out in the bankruptcy from 1982, but the statute of limitations that would have allowed the creditor to sue you for the balance has run out. You need to make sure that you send over proof that the debt was included in your bankruptcy. If you did not save the bankruptcy paperwork then it will take a little effort to get the old case from the bankruptcy court, but it is available.

The most common statement I get from clients is that the creditor or subsequent collection agency claims you have a moral obligation to pay the debt back. While that might be true to the original creditor, this is completely false with regard to a collection agency buying the debt for the purpose of hoping you will pay something and potentially reestablish the statute of limitations.  

The statute of limitations for unpaid debt is typically four years from the date of last payment or last use. If you make a payment to the collection agency then it restarts the statute of limitations clock. While you may not believe the collection agency that’s calling, the caller might scare you into paying. That would be the worst thing you could do.

You need to tell the collector that you refuse to pay because the debt was eliminated in your previously adjudicated bankruptcy. Fax and mail a certified letter to the collection agency indicating that the debt was eliminated in bankruptcy.

Then, you need to pull your credit report in six months to see whether that new collection account remains on the report. If it is listed on your credit report then you can dispute that new credit line with the three credit bureaus to have it removed. 

You are dealing with the shady side of debt collection, Dora. And you must know your rights to ensure you are not duped into paying on a debt for which you have no legal obligation to pay.