Collection laws: Should you pay off a time-barred debt?
Debt collectors have certain number of years (known as statute of limitations period) to sue you in order to collect on a debt. After that, your unpaid debts become ‘time-barred’ – means that a debt collector cannot sue you for the debt (though you still owe).
Since the statute of limitations varies from state to state and under certain circumstances, the debt clock can be reset. Therefore, as per the Federal Trade Commission (FTC), a debtor should be aware of his/her rights under the Fair Debt Collection Practices Act (FDCPA) if a collection agency contacts you about an old debt.
When a debt becomes too old to collect?
Technically, state law determines the period of the statute of limitations. The debt clock usually starts ticking whenever you fail to make a payment and stops once the state specified statute of limitations period for the certain debt ends. In most states, the statute of limitations period tends to range between 3-6 years. To know about the statute of limitations on different kinds of debt in your state, visit our page on SOL laws.
Should you pay on a ‘time-barred’ debt?
It depends completely on you. You have certain options and each of those has specific consequences. So before you go further with an option, talk to your lawyer.
Option 1: Pay nothing on the debt
Though the collector may not sue to collect on the debt, you still owe it. The collector can, however, continue with his collection activities unless you send a cease and desist letter demanding an immediate cease on all communication. However, not paying a debt may lower your credit score and make it harder to obtain credit in future.
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CONNECTICUT – David B. Fein, United States Attorney for the District of Connecticut, announced few days back that Pinto, 68, of Wellington, Florida, and Peter Pinto, 37, of East Quogue, New York, pleaded guilty on May 11 before the District Judge Stefan Underhill in Bridgeport for committing bank fraud, wire fraud, money laundering, and wire fraud stemming from a $10 million fraud scheme, which they carried out while working as executives at Oxford Collection Agency.
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The federal and state governments are incorporating FTC Act (Section-5), FTC telemarketing sales rules and Uniform Debt Management Services Act into their legislation. With the implementation of these new laws, it will be improper and unlawful for ordinary professionals to identify themselves as debt arbitrators. Therefore, it has become very important for them to get certified by recognized and acclaimed organization that provides IAPDA training programs. This training program will make a professional much more informed about the debt relief industry. It will also hone their skill of negotiation and give recognition as a consumer debt specialist.