As more and more consumers struggled to stay above water during the Great Recession of 2008, delinquent debt buyers were turning bad debt into big business. The debt collections business is a $90+ billion industry as of 2009 and it is expected to expand by 23 percent between 2009 and 2016.
Debt collection agencies operate by purchasing debt that is delinquent from the original creditors at a discount. Debt collectors then attempt to go after the consumer for payment of these debts. In Georgia, if you are contacted by a debt collections agency, it is important to know your statute of limitations.
Statute of Limitations in Georgia
When you are first contacted by a debt collector about a delinquent debt, your first step should be to obtain a copy of your credit report. Your credit report will tell you the date of last activity which determines your statute of limitations. Depending on the credit bureau, the date of last activity is either the date of the last made payment, or the date of the first delinquent payment.
The statute of limitations is a limit on the amount of time that a creditor has to sue you over a delinquent debt in court. Once the statute of limitations has expired, a collections agency can no longer use the court system to compel you to pay.
In Georgia, the statute of limitations for open accounts such as credit cards is four years. This means that four years from the date of last activity the debt can no longer be collected by lawsuit.
Time-barred Debt
Once the four-year period of the statute of limitations has passed in Georgia, a debt collector still has the right to attempt to collect on a debt. Outside of the statute of limitations, however, collections agencies are no longer allowed to sue or threaten to sue you to force you to pay this debt.
The Federal Trade Commission has ruled that if a collections agency attempts to sue you to collect a debt outside of the statute of limitations, "you can have the suit dismissed by letting the court or judge know the debt is, indeed, time-barred."
Statute of Limitations and Your Credit Report
The reason that many debt collectors will attempt to collect on a bad debt is because, in many cases, the account still remains on your credit report for up to seven years after the date of last activity. That means that even after the four-year statute of limitations on the debt in question expires, the account is still on your credit report for an additional three years.
The date of last activity is important to know because many times a debt gets sold multiple times and a less than credible debt collector will attempt to change the date of last activity.
Zombie Debt and Debt Re-Aging
Debt re-aging is a common practice in the collections industry. A debt can re-age when a consumer takes an action on the debt that changes the date of last activity. Actions such as making a payment can cause the date of last activity to reset which then causes the statute of limitations to start all over again.
If you are contacted about a debt that is outside of the statute of limitations, consumer advocates recommend that you do not acknowledge that this debt is yours. Simply acknowledging a debt's validity can be enough to cause the statute of limitation's clock to start over.
Sometimes a debt collector will purchase a portfolio of bad debts from another collector. Many times, these debts are past the statute of limitations and in some circumstances, the debts in question are outside of the seven-year window to be included on your credit report. Debt collectors will nonetheless attempt to collect on these debts. This is known as "zombie debt."
Fair Credit Reporting Act and Fair Debt Collections Practices Act
The Fair Debt Collections Practices Act is a federal law that spells out what a debt collector can and cannot do when contacting you in regards to a delinquent debt. If you are ever contacted by a third party debt collector, you need to learn about your rights as a consumer under the FDCPA.
The Fair Credit Reporting Act is a consumer protection law that requires credit-reporting agencies to ensure that the information on your credit file is completely accurate. This includes making sure that collections agencies that purchase old debt have the correct date of last activity.
No matter when a debt collector acquires a debt, the statute of limitations is calculated from the date of last activity with the original creditor. You need to beware of collectors that change the date of last activity to the date the debt was acquired.
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