Consumers are not required to repay debts that are beyond the statute of limitations for collection, also known as time-barred debts. However, the law is not cut and dry, and it is important to understand what consumer’s rights and responsibilities are in regard to old debts.
Time Barred Debts
Debt collectors do not have an unlimited amount of time to collect on old debts. State statutes limit their ability to pursue and enforce involuntary payment. Time-barred debts include debts incurred for goods or services that are based upon a verbal contract or oral agreement has a statute of limitations that starts four years from the date the contract began. Conversely, written contracts have a statute of limitations of six years.
The statute of limitations on promissory notes such as private loans has a six-year statute of limitations. For accounts such as credit cards and other revolving accounts, the statute of limitations is four years. The statute of limitations vary from state to state and it is important to speak with an FDCPA violation attorney to understand the statute of limitations that applies to a specific debt.
Don’t Waive, Extend, or Revive the Statute of Limitations
In many cases, the entity trying to collect the debt is not the original holder of the debt, but rather a debt collection agency that has purchased the debt. This often happens when the statute of limitations on the debt is about to expire and the holder of the debt sells it for pennies on the dollar in order to recoup some of their loss. It is common for many consumers to make the mistake of paying just some of their debt in hopes that the debt collector will go away.
In reality, this restarts the statute of limitations. The debt collector can continue pursuing the claim if the individual makes an effort to repay even a small amount of the balance. Sometimes, aggressive debt collectors will also ask consumers to sign documents whose hidden language in the fine print waives or extends the statute of limitations. In these situations, it is best for the consumer and an FDCPA violation attorney to send a cease and desist letter to the debt collection agency to put the debt to bed once and for all.