Nearly 77% of Americans are dealing with some sort of debt. And despite the best of intentions, they are drowning in numbers accumulated from either student loans, credit card bills, mortgages, car loans, or personal loans.
Are you hanging onto an unpaid debt? If you’re hoping that it will simply disappear if you ignore it long enough, that’s not going to happen. A creditor can chase you until you’ve paid them what you owe. So even if he stops contacting you after a while, a creditor can resume efforts anytime either personally or through a debt collector.
How long can a debt technically haunt you? It all depends where you live. Though there are laws about debt collection practices, you should be aware of your rights. The Fair Debt Collection Practices Act (FDCPA) has set guidelines at a federal level, but don’t hesitate to contact a legal professional for further clarification.
Who are debt collectors?
An individual who is unable to repay a loan, has overdue payments on utility bills, credit cards, auto finance, etc., or is unable to settle debt will have his delinquency reported to the credit bureau. The debt will be turned over to a debt collector within three to six months of default. Similarly, debt payment from one business to another can require the services of a commercial debt agency. Their job focuses on attempting to recover the full amount of the debt.
Many companies find it cheaper to employ the services of a debt collection agency. They have the tools and resources to track down a debtor, especially if he has changed his phone number or residence. Typically, an operating fee or percentage of the total amount collected is charged.
What are their tactics?
Many debt collectors and agencies use ringless voicemails to communicate with people who are defaulters. In order to be careful, it is important that you watch out for ringless voicemail debt collectors. This is one of the major tactics and strategies, which debt collection agencies are using these days..
So how long can debt collectors keep trying to collect the debt?
Each state has a statute of limitations. This is the limited time period debt collectors or creditors have to file a lawsuit to recover a debt. It varies depending upon state laws and the type of debt, but most have between 4 to 6 years from the date the last payment was made.
If communication between the debtor and the creditor breaks down and enough time elapses, any outstanding debt after the statute of limitations is then labeled as a time-barred debt.
Some states prohibit collectors from to attempting to recover a debt once it’s past the statute of limitations. In other places, they can’t sue after this period, but they may still try to collect the amount. However, this doesn’t mean that once the statute of limitations has expired you won’t be sued for the debt. In fact, some businesses sell their very old debts to debt buyers, who then pursue debtors with the sole intention of taking the debtor to court. If you get a court summons, you should not ignore it. All you need to do is appear in court and explain that the debt is time-barred.
Failure to do so will let a judge issue a default judgment, giving the agency the right to access the money you have in the bank or your wages.
What happens if a collection agency contacts you?
If a debt collection agency communicates with you, consider the following points:
- Ask for a written notice. Limit phone conversation to a minimum; avoid saying anything that could hurt you later on.
- Once you receive a notification, you have 30 days to request them to validate the debt. Make sure to send the letter through certified mail.
- Contact a lawyer, preferably one who has experience in cases against debt collectors. Some may even offer a free consultation.
- If the debt is confirmed, you can
- Pay it. This might be the best way to resolve the situation once and for all. If you can pay it, by all means, do. Remember to keep track of the amount due and your payment. Because old debts often get sold to other debt collectors, you need to have written proof that the debt has been paid off.
- Settle. If you can’t pay the full amount, or the original debt has become grossly inflated over time, you can work out an arrangement. You will need to do this under the guidance of an expert lawyer. This is tricky because you could reset the statute of limitations once negotiations begin. Or you could get sued for the entire debt.
- Cease contact. Write a letter telling the debt collectors to stop contacting you. They are allowed to do so only to inform you if legal action is taken against you.
- Be prepared. Even if a collection agency does leave you alone, don’t be surprised if another one contacts you about the debt. It’s possible that they sold the debt to someone else.
How does all this affect my credit?
On a closing note, don’t confuse statute of limitations with the time that your debt remains on a credit bureau. Federal law states that a collection account can stay on a credit report for up to 7.5 years from the date that you first fell behind on payments. Even if the debt is paid off, it may remain on your credit report. That’s why it’s important to keep complete, up-to-date documentation of any paperwork about your debt.