What to Do if You’re Contacted About a Time-Barred Debt

Raising a statute of limitations as a defense to a claim in a lawsuit means that you are stating that the claim is time-barred. This means that a creditor has missed the deadline to legally bring a claim against you in court. While the creditor can still try to collect the debt to recover repayment, you can raise a time-barred debt defense to render the creditor’s efforts meaningless. 

There are debt collectors who routinely try to collect time-barred debts, especially credit card debts. But there are ways to deal with these debt collectors. This article will explain what to do if you’re contacted by a creditor that is trying to collect a debt barred by a statute of limitations. 

Statutes of Limitations

Statutes of limitations are laws that limit the time that a plaintiff is granted before they can no longer file a lawsuit in court. If a party fails to file its lawsuit within the required amount of time, it will then be time-barred from seeking payment of the claim through the legal system. A creditor or debt collector can still make attempts to collect the debt but can no longer use the courts to recover it, which means that a borrower can safely ignore these efforts without fear of legal action.

Statutes of limitations were created to encourage plaintiffs to bring lawsuits without unnecessary delay. They help to bring peace of mind to potential defendants by getting rid of unending uncertainty about the potential of a new lawsuit. Note though, that If a statute of limitations expires, the affected debt isn’t erased from your credit history, your creditor simply can’t come after you in court for repayment if you successfully raise time-barred debt as a defense to your situation. The debt will remain subject to credit reporting by the credit bureaus. This means that the debt will still appear on your credit report. It may even affect your credit score. 

Which state’s statute of limitations applies to your case?

A time-barred debt doesn't mean that you don’t owe the debt or that a debt collector can't continue to try to collect the debt. That is unless you live in Mississippi, Wisconsin, or North Carolina, or any of these states’ laws apply to your debt.  

Because statutes of limitations differ by state, you’ll first have to determine which state’s laws apply to your case. This is not always easy to determine. Usually, your debt is governed by statutes enacted in the state where you live. Sometimes, a state is specified in the terms of the debt agreement under a "choice of laws" provision. If this provision is in the contract, it may cause a conflict with the state’s laws. This may be resolved by using the statute of limitations in your home state or whichever statute of limitations is shorter.

Not only do statutes of limitations differ by state, these statutes may also differ by the type of claim in question. Once you’ve identified the state that has jurisdiction over your case, you must determine which statute within that state’s laws is applicable. For example, consider the following statutes of limitations related to debts:

• A written contract statute of limitations is usually the longest.

• An unwritten contract statute of limitations is usually shorter.

• Open account or credit line statute of limitations may be the shortest. Although this originates as a written contract, there is no written contract for each additional charge. As a result, some states treat these as unwritten contracts.

Once you know which state statute applies to your case, you’ll have to figure out when the time stated in the statute starts to run and ends its run. This, too, will vary by state and should be laid out in your state’s statute. There are many possibilities, including the following:

• The date of the last charge on the account

• The date of the contract

• The date the account first became delinquent

• The date the last payment was made

One or all the possibilities mentioned above may revive or restart the limitations period. Although a statute of limitations may seem simple and straightforward, it isn’t. It may be wise to consider consulting with an attorney or seeking legal help to determine whether your debt is time-barred. 

What Not to Do When Contacted About a Time-Barred Debt

Unfortunately, debt collectors may still try to contact you about old debts that are time-barred by the statute of limitations. This is especially true for credit card debt. The Federal Debt Collection Practices Act (FDCPA) requires debt collectors to reply truthfully if you ask when the statute of limitations for your debt expires under applicable state law. As of January 1, 2019, debt collectors in California must tell you if a debt is time-barred. The collector has to include the notice in the first written communication it sends you after the statute of limitations expires.

Any debt collector that contacts you is required by law to tell you certain information about the debt that it is attempting to collect. This information includes:

• The name of the creditor;

• The amount owed;

• That you may dispute the debt; and

• That you may request the name and address of the original creditor if it’s different from the current creditor.

If you are contacted by a debt collector who is trying to collect a time-barred debt, do not make a payment. This may revive a zombie debt. This is a term for an old debt that is likely uncollectible and is, essentially, “coming back from the dead” to haunt you. You can and should send the debt collector a letter requesting validation of the debt, that should include information about the original creditor, the amount of the debt, and any options that you have for disputing it. 

A debt collector may continue to make attempts to collect the debt until it is paid in full, even if it is technically uncollectable. The collector is hoping that you won’t know your rights to raise time-barred debt as a defense to a lawsuit or that you’ll just pay the debt to get the collector off your back. An attorney can help you if you are being repeatedly contacted by a debt collector requesting repayment of a time-barred debt.

After you are contacted about an old time-barred debt, review your credit report carefully. Oftentimes, creditors report negative information about such debt as if it's recent information, which may be a violation of the Fair Credit Reporting Act (FCRA).

How to Handle a Time-Barred Debt if You’re Sued

It is important to note that a creditor can still sue you or try to collect a time-barred debt unless you live in Mississippi, Wisconsin, or North Carolina, as mentioned above. In those three states alone, your repayment obligation is permanently terminated once the statute of limitations is reached on that debt. 

In all other states, if a creditor or debt collector tries to sue you for a time-barred debt, you’ll need to raise the statute of limitations as a defense. If you don’t, the debt collector could obtain a judgment against you for the amount of the unpaid debt. Raising the statute of limitations as a defense should result in a dismissal of the case.  

You also have other legal remedies against parties that try to collect time-barred debts. If you received a discharge of the time-barred debt in a bankruptcy case, you may be able to sue for a violation of the discharge injunction. The FDCPA also provides remedies in this situation. For example, the FDCPA requires the collection agency to stop contacting you if you’ve asked them to do so in writing.

If you are financially burdened by unpaid debts that are not yet time-barred, you may want to consider your options for debt relief. There are ways to manage your debts, including debt settlement, debt consolidation, and even bankruptcy. 

The Fair Debt Collection Practices Act (FDCPA)

Debts are often sold by original creditors to third-party debt buyers that buy past-due debts and try to collect them. Unfortunately, creditors often give little consideration to the age of the debt they are collecting. They are only concerned with the repayment of the debt.

The Fair Debt Collection Practices Act is a federal law that limits the actions of third-party debt collectors. Under the FDCPA, debt collectors include collection agencies, debt buyers, and lawyers in the business of debt collection. The FDCPA applies to the collection of mortgage debt, credit card debt, medical debts, and consumer debts. The act does not apply to original lenders or creditors or to debts incurred by businesses. The Federal Trade Commission (FTC) enforces this Act. The FTC’s work is performed by the Consumer Financial Protection Bureau (CFPB). 

There is a new CFPB rule, scheduled to take effect on November 30, 2021, which outlines additional violations of the FDCPA. Many of these are supported or influenced by case law, or decisions that have been made by the courts. Violations include:

• A debt collector bringing a lawsuit or threatening to bring a lawsuit to collect a time-barred debt. According to case law, the threat doesn't have to be explicit, it may be implicit.

• A debt collector failing to disclose that it is collecting a time-barred debt before accepting a partial payment reviving the statute of limitations. While case law supports this, it isn't in the new CFPB rules. Under the new administration, this may change.

• A debt collector threatening to make a negative report to the credit bureaus on a time-barred debt if it's near or past the end of the Federal Credit Reporting Act’s seven-year limit for negative credit reporting.

Note that with the new Biden administration, there could be changes to the CFPB rules before November, when the new rules are scheduled to take effect.

Let’s Summarize…

Statutes of limitations provide time limits for bringing lawsuits in debt-collection cases. This means that the collection of any debt that you incur is subject to the time limit stated in the applicable statute of limitations. Once the period stated in the statute of limitations expires, that debt is time-barred. Because these statutes vary by state and by type of claim, it is not always obvious which statute of limitations applies, so it can be useful to seek legal advice.

It is not uncommon for debt collectors to attempt to collect time-barred debts. It is important to carefully respond to any attempt to collect a time-barred debt. Otherwise, the obligation to repay the debt may be revived. Fortunately, there are options for successfully dealing with time-barred debts and ensuring that you’re never bothered with them again.