Creditors send consumer debts to collection agencies when they give up on ever receiving payment from the debtor. The collection agency then pursues the unpaid amount. If the collection agency is also unsuccessful it will unload the debt by selling it to another debt collection company. Over time, unpaid debt passes from debt collector to debt collector and each will attempt to collect on the account.
Collecting Via Lawsuit
A collection agency holding a 20-year-old debt cannot collect the debt by suing you and obtaining a judgment. Doing so is against the law. All states carry different statutes of limitations restricting the time frame during which creditors can file collection lawsuits. Although these statutes vary, most fall in the range of three to six years. No state permits creditors to file collection lawsuits against consumers after 20 years.
Voluntary Payment
If you voluntarily submit payment to a collection agency for a debt that is 20 years old, the collection agency can and will accept your payment. Although it is against the law for the company to sue you, it is not against the law for the company to accept your payment. The debt remains valid and collectable regardless of its age or how many times the account was bought and sold.
Settlement Negotiations
Collection agencies that purchase extremely old debts know that their odds of collecting are low. The older a debt is, the more cheaply a company can purchase it. The benefit of this for consumers is that collection agencies are often much more willing to negotiate a settlement on older debts than more recent ones. Because collection agencies cannot take legal action against a debtor for a 20-year-old debt, collection agents have little choice but to accept whatever amount the consumer wishes to pay.
Illegal Practices
Although the law strictly prohibits collection agencies from filing debt collection lawsuits on out-of-statute debts, some companies do just that. If a collection agency files an illegal lawsuit against you and you notify the court of this fact, it will dismiss the lawsuit. You can then sue the collection agency for violating your rights by attempting to sue you for a debt that was out of statute.
Yet another illegal practice that collection agencies cannot use when collecting old debts is threatening to file a lawsuit against you. The Fair Debt Collection Practices Act allows debt collectors to threaten consumers with legal action --- but only if the company still retains the right to do so. Because the statue of limitations on a 20-year-old debt has already passed, the company cannot legally sue and thus cannot threaten to do so.
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