Thursday, October 17, 2013

Time-Barred Debts

You know that old credit card from 6 years ago that yet another company is trying to collect on? Well, you may not have to pay it. And, whether you pay it or not, there are a few things you should know about old unsecured debts.  

First of all that Debt collectors are salivating at the possible financial windfall of your tax refund, and efforts to collect may be more aggressive at tax refund time, or as your debt nears the 6 year aging deadline. 

The idea of collecting on dead-in-the-water debt is very appealing to a debt collection company. The fair debt collection practices act (FDCPA) defines debt collection companies as any entity which collects debt on a regular basis.  This could be a debt collection agency's, attorney office, or a company buying unpaid debt.

Before you give up your tax refund to a collection company, there are a few things you should know. The 1st thing to consider is the statute of limitations in your state. In Massachusetts it’s 6 years, while Rhode Island is 10 years, and New Hampshire is 3. If the clock ticks past the statute of limitations, with absolutely no payments being made to the creditor, the debt is considered to be time-barred.  

This means that a debt collection agency may no longer sue you for the debt. This is not to say you no longer owe the debt, only that you may not be sued for it. The company may however, continue to try and collect from you, and many collection agencies become increasingly aggressive as the statute deadline approaches.

Should you be contacted by a collection agency regarding a debt that you believe is time-barred, you should ask directly is the get time-barred, or when was the last payment received on this debt. If they decline to answer or you believe the answer is not truthful, you should send a letter within 30 days asking that they verify the debt. They are not allowed to continue to collect until the debt is verified.

The most important thing to remember is that in most states, absolutely any payment starts the clock ticking again on the statute. In some states even the promise to pay is enough to revive the debt.

For further information about time-barred debt, you may contact a legal aid lawyer, your state Atty. Gen., the Federal Trade Commission, or PowerDownDebt, Inc.

Disclaimer: the above blog entry is the opinion of PowerDownDebt, Inc., and Frances Rahaim, Ph.D. , and should not be considered as legal or tax advice. Please seek the advice of a qualified attorney or tax professional. PowerDownDebt, Inc. is a debt management company located in western Massachusetts, and advocates for good credit etc.

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