Should Old Debt Be Paid Off?

There's no one-size-fits-all answer to whether a person should pay off old debt. People who make payments on old debts can unknowingly create legal problems for themselves. Your best option may be to consult with an attorney before speaking with any debt collectors who are trying to recoup money owed on old debts.

Old Debt Limitations

Debt collectors can pursue money owed on old debts even if the debts no longer fall under a state's statute of limitations. State statutes restrict the amount of time creditors and others have to file a lawsuit to collect a debt. The statutes vary from state to state, but they give creditors and lenders two to 15 years to sue debtors to collect the money they owe for credit-card accounts and other forms of debt. Collection companies are breaking the law if they sue or threaten to sue to collect debt for which the statute of limitations has expired. However, they can still contact debtors to pursue payments.

Reviving Old Debts

A "New York Times" article titled "Old Debts That Won't Die" says collectors probably won't tell you that making a partial payment on an old debt can restart a statute of limitations that has already expired. Therefore, debtors can unwittingly risk being sued by giving a collection company as much as five additional years to file a lawsuit to recoup a debt. Consumers who make a payment that restarts a statute of limitations also risk having the associated delinquent debt appear on their credit reports.

Debt Settlements

Some people may think they settled an old debt long ago because they made an agreement with a company to pay a lump sum on the debt. However, debts aren't necessarily erased when consumers pay a lump sum that's less than the total amount owed. In some circumstances, the unpaid amount could be sought by a collection company at a later date. Consider seeking legal advice before you agree to pay a settlement that is less than you owe a creditor or lender.

Considerations

Credit-card companies, health-care providers and other businesses are selling consumers' old, unpaid debts to debt-buying companies that profit from getting debtors to fork over what they owe. It's usually a better deal for creditors to sell delinquent debts to debt buyers than to spend time collecting old debts themselves. You may want to pay off a debt for moral reasons, but you should first require the collection company to send information to you that verifies your account information and the total amount you owe. You also should consider whether you can pay off the total amount owed at one time and avoid payment problems on other debts.