You’ve probably heard of “good” and “bad” debt. One can be beneficial to you and support a healthy credit score. The other can be a burden on your finances and credit report.
But what about time-barred debt? This type of debt could be hurting your credit score — but you may not need to repay it if collectors coming calling. Find out how time-barred debt works, how it affects your finances and what your options are for dealing with it.
What is time-barred debt?
Time-barred debt is simply debt that is too old for collections. How old does time-barred debt have to be? That depends on the statute of limitations in your state, as well as the type of debt you have. For example, there is no statute of limitations on federal student loans (although there may be on private student loans) and the statute of limitations on consumer debt may be different than debt on other loans.
Why is it important to understand time-barred debt? Once a debt becomes time-barred, it is no longer possible to be sued over the debt or for the debt to go into collections.
But just because you may not be able to be sued for the debt doesn’t mean that ignoring the debt is consequence-free. If unpaid, time-barred debt may still show up on your credit statement, which could make it harder to get loans or competitive interest rates. On the other hand, in some states, paying a partial amount of the debt revives the debt, taking it out of time-barred status, and possibly allowing a collector to collect the debt. That’s why it’s a smart idea to fully understand your rights and options when it comes to time-barred debt.
What are your rights when it comes to time-barred debt?
If you have collectors calling, it’s important to know where your debt stands — and what your rights are — when it comes to debt. But remember: collectors aren’t all powerful, and you have rights as a consumer under the Fair Debt Collections Practices Act (FDCPA). Knowing your rights can help you keep calm, know what you owe, and develop a financial plan for how to handle your debt. Here are your rights regarding time-barred debt:
You have a right to honesty
Don’t know if the debt is time-barred? Ask. According to the FTC, the answer collectors give you must be truthful. That said, they may decline to answer, or they may not even know. But asking before you do your own intel can be a good first step.
You have a right to your information
If they don’t answer your question about whether the debt is time-barred, ask for the date of your last payment. This date is an important marker in determining whether your debt is time-barred — use this date and work backwards based on the statute of limitations in your state to determine whether the debt is time-barred.
You have a right to request how much you owe in writing
If you are being asked for payment on a debt — regardless of whether it’s time-barred or not — ask for a written record of the debt. This notice, called a validation notice, will give you the name of the creditor, the amount you owe, and what to do if you believe the debt is not yours.
You have a right to request no more phone calls
While a collector may not be able to sue over time-barred debt, they can still contact you — unless you tell them to stop. To do so, you can request in writing that the collector stops contacting you. They must comply with this request, unless a specific action, like filing a lawsuit, is taken (which it won’t be, if the debt truly is time-barred.) That said, it can be a good idea to listen at least once to the debt collector, to get your validation notice and have a full picture of what you may owe.
What to do (and not do) with time-barred debt
Don’t commit to anything over the phone
It can be scary to have a phone call with a collections agency. But it’s important to make sure you fully understand your debt before you commit to a repayment plan, which could restart the clock when it comes to any time-barred debt. So what should you do if a debt collector calls? It’s tempting to let the call go straight to voicemail, but that won’t stop the calls. Instead, remain calm, avoid giving sensitive information over the phone, and make sure to request a validation notice so you know what you’re dealing with.
Research the statute of limitations in your state
Know what the statute of limitations may be in your state, and know whether your contract is an oral or written contract. You may assume everything is written — after all, it’s not like you and your credit card company had a long heart-to-heart conversation before they offered you a credit card — but in general, written contracts are usually signed paperwork that are closed contracts, like a private student loan. Oral contracts may be open-ended agreements where the amount of the loan fluctuates based on revolving debt and credit limits.
Know your options
Remember, time-barred debt doesn’t erase the debt you owe. Having a plan for how to deal with the debt, such as speaking with an attorney, financial expert, or pro-bono financial counselor, can help you decide on the best option for you. It may be possible to negotiate with the company to come up with a compromise, such as them possibly forgiving some of the debt if you agree to pay a certain amount in a certain length of time. Of course, that re-opens the account and makes it possible for the creditor to sue you, so it’s smart to make sure that you are able to repay the debt.
Pay off the debt you owe
Does it make sense to pay off the debt you owe, or the debt the lender would like you to pay after you have a conversation with them? In general, yes. Like all private debt, negative information will be removed from your credit report after seven years. But in the time leading up to that point, having an unpaid debt on your report, even if it is time-barred, could negatively affect your score.
Paying off the debt responsibly can be a great way to wipe the slate clean and start over. A personal loan can be one potential way to quickly pay off time-barred debt. Of course, as with any financial product, make sure you understand the terms of the loan and have a plan in place for how to make payments.
Talk with a professional
Depending on your circumstances, it may make sense to talk to a financial pro or financial counselor or student loan consultant to get some insight into what might be the best option for you.
For example, if you’re struggling with unmanageable debt, it might make sense to consider bankruptcy, but that’s an extreme solution. But if you feel like you’re in over your head, a professional may help provide perspective.
Bottom line: Don’t hide from time-barred debt
Just because a debt is old doesn’t mean it’s forgotten. Having a clear understanding of how time-barred debt affects you, your finances, and your conscience can help you figure out the best way forward for you. Of course, knowing your rights can help you keep your cool when a collector calls. Dealing with time-barred debt and finally getting it off your credit history can be a financial move that has positive implications for your future.
Interested in a personal loan?Here are the top personal loan lenders of 2019!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.
†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com
**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.
7 Important Disclosures for Earnest.
8 Important Disclosures for Avant.
* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.
** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33
* Important Disclosures for Upgrade Bank.
Upgrade Bank Disclosures
** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.
|5.74% – 16.99%1||$5,000 - $100,000|
|7.54% – 35.99%||$1,000 - $50,000|
|7.99% – 35.89%*||$1,000 - $50,000|
|5.99% – 24.99%2||$5,000 - $35,000|
|5.99% – 29.99%3||$7,500 - $40,000|
|6.79% – 20.89%4||$5,000 - $50,000|
|9.99% – 35.99%5||$2,000 - $25,000|
|6.95% – 35.89%6||$1,000 - $40,000|
|6.99% – 18.24%7||$5,000 - $75,000|
|9.95% – 35.99%8||$2,000 - $35,000|