How to Prevent Old Debts from Coming Back to Life

The following is presented for informational purposes only and is not intended as legal advice.
One big thing that most consumers don't know is that there's a time limit to your legal responsibility to repay a debt. This is known as the statute of limitations and for debt it's different in every state.
These statutes of limitations mean that after a set period of time, you're no longer legally obligated to repay the debt. If the creditor attempted to sue you after that time period had expired, you (as the debtor) would have grounds to have the case dismissed.
The trouble, however, is that even debts that are outside of the established time limit can be "revived" and become your legal responsibility once again. If you have old debts that you thought were permanently in your past, here's what you need to know to protect yourself.
How old debts are revived
It's not hard for creditors and debt collectors to revive an old debt. If a debt collector can get you to make a payment on the debt, or even simply claim responsibility for the debt, then the clock on the statute of limitations may be reset.
In other words, a collector may threaten to sue you – even though you're no longer legally responsible for the debt – and if you comply, suddenly you're legally responsible once again.
How to protect yourself
The more you know, the easier it is to avoid making a costly mistake and reviving an old debt where your legal obligation has otherwise expired. Consider these steps to protect yourself from unethical debt collectors.
Find out the statutes of limitations on debt in your state
Statutes of limitations on debt vary wildly from state to state. If you default on a credit card debt in Texas, the risk of getting hit with a lawsuit generally ends after four years when the statute runs out. Default on a credit card in Ohio, on the other hand, and the statute doesn’t expire for 15 years.
Try to stay apprised of the statutes in your state, as well as any other applicable consumer protection laws. A dishonest collector is going to be banking on the fact that you don’t know your rights.
Have the debt verified
If you’re unsure about a debt, you have the right to receive verification of the debt from the collector. You should request this verification in writing within 30 days of the initial contact. The verification should include the amount of the debt, where it came from (the original creditor), and information on your right to dispute the debt.
Meanwhile, it’s a good idea to pull a copy of your credit report and see what it says about the debt in question. And if you’re a little suspicious about the debt collector’s credibility, a quick internet search may be able to help you confirm if they’re legitimate or not.
Be alert for signs of fraud
As noted by the Consumer Financial Protection Bureau, there are usually some telltale signs that a debt collector isn’t acting in good faith. Some of the most common signs include:
Not providing full details of the debt
If a collector doesn’t comply with your right to have the debt verified, or is especially evasive about key details of the debt (including where it came from), that’s a red flag.
Threatening jail or other legal repercussions
It is very unlikely that an unpaid debt will land you in jail. A debt collector may choose to sue you in an effort to collect the debt, but usually as a last resort. If the debt collector makes overly aggressive threats, consider reporting them to the FTC.
Asking for payment by money transfer
Beware of any collector asking for payment in a method that makes it difficult to reclaim the money should you discover you’ve been scammed.
Generally speaking, any collector that doesn’t abide by the rules laid out in the Fair Debt Collection Practices Act (FDCPA) is breaking the law and may be acting fraudulently.
Legal responsibility vs. financial responsibility
Finally, it’s important to remember that the question of whether or not you can be sued for a debt is not the same as the question of whether or not you're responsible for the debt. For each debt, there are three things to consider:
- Statute of limitations – When this expires, you cannot technically be sued for the debt in question.
- Credit report – Most debts will remain on your credit report for seven years from the date of the last payment. Even after the statute of limitation expires, the debt may still remain on your credit report and factor into your credit score.
- Collection status – Debt itself never expires. The statute of limitations may expire and it may fall off of your credit report, but if the debt is never paid, it never goes away. As long as they follow the rules of the FDCPA, a collector may attempt to collect on a debt for the rest of recorded time. They probably won’t, of course, but it would be within their rights to do so. If you’d prefer they didn’t, you can always pay the debt, or you can send a written request asking the collector to not contact you again.
Laws and consumer protections are great, but they can only do so much for you if you don’t know what they are. When it comes to old debts, be cautious and know your rights.
If you’re dealing with more collection calls than you know what to do with, MMI can help. We offer debt repayment plans tailored to your situation. Even if you debt is in collections, we can help you save money and stop the phone calls. Begin with a free online financial analysis to get your custom recommendations.