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How to Handle Time-barred debt

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How to Handle Time-Barred Debt

You cannot be sued for time-barred loans, however you still owe it.

by Sean Pyles Senior Writer | Personal financial and debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet’s “Smart Money” podcast. The show “Smart Money,” Sean talks with Nerds on the NerdWallet Content team to answer listeners’ personal finance questions. With a particular focus on sensible and practical money tips, Sean provides real-world guidance that can help consumers better in their finances. In addition to answering listeners’ financial questions on “Smart Money” Sean also interviews guests who are not part of NerdWallet and also creates special segments that explore subjects like the racial wealth gap as well as how to get started investing, and the history of college loans.

Before Sean took over podcasting at NerdWallet, he covered topics that dealt with consumer debt. His writing has been featured on USA Today, The New York Times and other publications. When when he’s not writing about personal finances, Sean can be found working in his garden, going for walks, or walking his dog for long walks. Sean is located in Ocean Shores, Washington.

Aug 5, 2021

Editor: Kathy Hinson Lead Assigning Editor Personal finances, credit scoring debt and money management Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years working at The Oregonian in Portland in roles including copy desk chief and team director of design and editing. Her previous experience includes news and copy editing at various Southern California newspapers, including the Los Angeles Times. She earned a bachelor’s degree in journalism and mass communications from The University of Iowa.

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If a debt is more than the original, it’s known as time-barred debt. It means that creditors don’t have a legally valid right to pursue you over the debt, but they can attempt to sue you. They can also continue to pursue you in different ways, such as with telephone calls and negative credit reports.

Take care, as debt collection has many pitfalls. There’s a chance that you didn’t pay this debt, or that the collector is seeking the wrong amount, or that you already paid and the collection is in error.

You have a few methods to address this. Each has its benefits and drawbacks, and you might want to talk to an expert who is familiar with the consumer laws in your region before taking action.

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What you can do

If a collection agency calls you regarding the time-barred debt You can:

Challenge it.

Make it pay off but beware of ” ” (more on it below).

Discharge it through bankruptcy.

Don’t bother with it.

A debt collector must send you a notice within five days of the first time they contact you. This notice should include the amount due, the date of the last payment, the name of the collector is and how to request information on the creditor who originally contacted you. If you don’t receive this notice within 10 days from the time the first contact from the debt collector you, request it.

Challenge it

If you’re asked to pay a time-barred loan which isn’t yours, was already paid off or is otherwise invalid, you can contact the creditor and inform them that you’re disputing the debt.

You have 30 days from the first contact by the collector of debt to contest the debt before it is to be defaulted upon. If you challenge the debt within this window the collection process must be put off until the dispute is solved.

You can still challenge the debt within the 30 day period, however the debt collector may contact you to request payment while your dispute is being looked into.

Be as specific as you can within your correspondence. Say why the debt collection attempt isn’t valid, and include information on payment history or why the debt may not be yours, and any other relevant information. It is recommended to mail the letter in certified mail to get confirmation of receipt.

You may want to seek legal counsel while the case is being examined, as the process for contesting a claim can be complex.

If you feel that the debt collector is in violation of laws, you can make a complaint to the the .

Make it payoff and beware of resurrecting zombie debt

The debt may be paid off and get you out of the collections misery, but be certain you have the funds to pay the whole amount, which includes any penalties or fees.

While you might think that paying at least a little bit can get the debtor out of your way, the reality is that it can make things much worse instead. Making even one payment on a time-barred loan could be the spark that will bring it back to life and alters the time limit for repayment.

“In the case of a time-barred debt, failing to make payments can be extremely damaging,” says Colin Hector who is a staff attorney of the FTC. “In certain states when you pay a single amount even if you only pay $5 or $1 in one go, you’ve activated the whole] debt and you can be sued for the debt, plus the costs. The consumer should be aware what their options are prior to when they pay off a due.”

If you’re willing to pay for it, you have several choices:

You can pay in full using the lump sum.

Work with the creditor to set up the payment arrangement.

Make a deal to settle the debt with part of the amount.

Making a full payment can take the debt off your back for good, but make sure that you have the agreement in writing first. Keep the proof to ensure that the payment was properly recorded or the debt somehow gets sold to another collector.

You may also get the collector to take some portion of the amount you owe to settle the credit, but you must be aware. The debt might not be completely gone. If you don’t sign an agreement explicitly stating that the partial payment will cover the whole debt, the collector can sell the remainder of what you owe to a company for collection that can pursue you. The debt will also be marked as a partial one on your credit file, which will not look great for potential creditor in the future.

Whatever method you choose, be cautious: Get the agreement in writing before you make any payments. Keep track of your communications and payments in case the creditor fails to adhere to the deal. Written correspondence is easily recorded; however, if you opt to communicate by phone, keep track of the date, time, along with the names of those you spoke to.

Bankruptcy discharge through bankruptcy

If you want to rid your self of this burden for good but can’t afford to pay for it then you may be able to file for .

The unpaid debt is now in collections off your hands. However, the mark from bankruptcy will be replaced by it for the following years. You are likely to once you file for bankruptcy, but.

Do not ignore it

When debt is time-barred it is not possible to sue for the payment, but the debt will not disappear. You can ignore it, but creditors and your won’t.

The majority of delinquent debts will remain on your credit reports for up to seven and half years. It’s more difficult getting new lines of credit and will face higher interest rates.

Further, debt collectors can continue to seek payment. If you ignore the debt long enough you could risk the current collector selling you the debt once more and then you’ll need to repeat the process again , with a different collector.

What should you do if you’re sued

Beyond trying to seek payment, creditors may pursue you, even if a debt is past its deadline.

The most important thingto remember: Avoid ignoring a lawsuit. Ignoring it likely would result in an automatic judgement against you, which may result in . Be attentive to any notices you receive, take action promptly and exercise your rights as a consumer.

Consider talking with an attorney regarding how to proceed, and gather all the documents you can prove that the debt is time-barred. If your case is taken to court, you’ll need to submit proof of the date you made the last payment along with information about the bill. Simply stating that the debt is not time-barred is enough to have the case dismissed.

It is in violation of the Fair Debt Collection Practices Act for a debt collector sue you for the time-barred debt. Therefore, you can also file a complaint with the CFPB as well as the FTC and your state attorney general’s office.

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About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured on The New York Times, USA Today and elsewhere.

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