The United States has laws that limit the amount of time a creditor can collect a delinquent debt. However, some debt-collection companies attempt to skirt those laws to force consumers to pay delinquent debts that could be several years old. Consumers who aren't aware of their rights can easily be taken advantage of by those companies.
Statute of Limitations
Each state has a statute of limitations or a set time in which legal action can be taken over a debt. For example, California allows a company up to four years to file a lawsuit in an attempt to collect credit-card debt. A Bankrate article titled, "State Statutes of Limitations for Old Debts" reports that a debt collector who threatens to sue a consumer to recoup debt beyond a state's statute of limitations is violating the U.S. Fair Debt Collection Practices Act. Yet, an MSN Money article titled, "Zombie Debt is Hard to Kill," notes that some companies specialize in buying old debts to try to profit from collecting them. The article reports that debt buyers are using new technologies to track down debtors who are most likely to pay off old debts.
Court Judgments
New York City's Neighborhood Economic Development Advocacy Project says its mission is to promote community economic justice. The NEDAP notes on its website that New York allows companies six years from the date of default to file debt-collection lawsuits. Yet the NEDAP says the date of default is about 30 days after the last payment was made. Therefore, a consumer who made his last payment on an old credit card in December 2010 could be sued by a debt collector until January 2017. Furthermore, the NEDAP says if the collector wins a court judgment against the consumer within the original six-year time frame, the statute of limitations to collect on the court judgment is 20 years.
Fair Debt Collection Practices Act
Violations of the Fair Debt Collection Practices Act aren't uncommon. Therefore, consumers should know the statute of limitations for debt collection in their state. A collection agency's legal actions are limited if someone contacts you about a debt on which the statute has expired. You could try to negotiate a settlement to avoid a lawsuit if the statute hasn't expired, but you may want to seek an attorney's advice to avoid further problems. For instance, another collection agency could try to recoup the rest of what you owe if you settle a debt with a collector by paying less than the full amount owed. Attorneys experienced in debt-collection cases are listed on the National Association of Consumer Advocates website.
Considerations
The NEDAP notes that delinquent debt information can only remain on your credit report for seven years, despite the number of times an old debt is purchased by debt buyers. Some debt buyers try to re-age old debts by reporting them to credit bureaus on the basis of the date they bought them, rather than report the original date of delinquency. Re-aging debt in that way is illegal, and causes a delinquent debt to remain in your credit files longer than it should if you don't dispute it.
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