What is a Time-Barred Debt?

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Consumers who feel that they are being mistreated and harassed by collection companies should research the Fair Debt Collection Practices Act (FDCPA), as there may be a right to collect compensation (called damages). FDCPA, founded in 1977, protects consumers against collection agencies that abuse and violate the rights of consumers. The FDCPA states what collection companies are and are not allowed to do. A collection agency must be honest at all times, send a notice in the mail about the debt, respect privacy and follow the law.

In every state there is a time period in which a collection agency has to pursue a claim against a consumer in order to collect a debt. This is known as a Statute of Limitations. While the time varies from state to state and is usually dependent on the type of debt, there is usually some form of SoL in play. Debts that have passed their statute of limitations are referred to as time barred debts.

Debt collectors can still contact and request payment for time-barred debt, but they cannot sue. FDCPA prohibits a collection agency from suing, or threatening to sue, for a time-barred debt. This is different than the time that negative information stays on credit reports, which is seven years.

The type of debts that may affect the SoL are open end accounts and closed end accounts. An open-end account is an account where the balance may be added onto and is changing constantly, like a credit card. A closed-end account is an account that has a fixed amount and is expected to be repaid at the end of a certain amount of time. This includes car, home and student loans, among other types of fixed debt. Usually, open-end accounts have a longer SoL than closed-end accounts, as open-end accounts may acquire more charges.

Certain things can make the time be reset on SoLs, such as:

  • Making a payment. If a partial payment is made, generally this will set back the SoL and the debt will stop being a time-barred debt. In this instance, it is best to work out regular payments.
  • Promising to make a payment, whether in writing or verbally. Make sure that you can commit to the payments in an effort to not be sued for the debt. Make sure that the agreement includes that the collection agency will not sue if the payments are being met.

There are several way to deal with time expired debts that you are being contacted about. It is important to get advice from an attorney about which strategy is the best:

  • Ask that the collection agency not contact you.
  • Ignore contact attempts from the agency.
  • Ask for verification of the debt.
  • Make a partial payment.
  • Negotiate to settle the debt for a lower amount.
  • Pay the debt in full.

There are a few ways that you can file a claim against a collection agency that violates the FDCPA. You can file in small claims court, with the FTC or with the state attorney general. But we recommend that you file the claim in state court. You will have the opportunity to present all of your case materials, and you have the opportunity to collect the largest amount of damages possible.

These attorneys can be located by contacting the bar association or doing an online search of collection attorneys. Also, consumers can research collection attorneys on the internet. Usually, you will have one year from the date of the incident in which to file. You will have a wide range of attorneys who handle collection claims.