With few exceptions, outstanding debt may be pursued indefinitely, but collection options may be limited after a certain period. The Fair Debt Collection Practices Act governs debt collection and your consumer rights. Just as creditors have the right to collect, you have the right to question the validity of a debt and file formal complaints of unfair or deceptive collection attempts with the Federal Trade Commission or your state attorney general.
While most debt doesn't expire, debts discharged in bankruptcy cannot be pursued. Debt collectors must tell you the total amount owed, name the original creditor and notify you of your right to dispute claims. If you send a dispute letter within 30-days of the initial contact, debt collectors must stop collection attempts until they send you verification validating the original debt. According to a 2010 New York Times report, creditors often sell unrecoverable debt to collection agencies for pennies on the dollar.
Statute of Limitations
Each state has a statute of limitations that prevents creditors from suing you for old debt. The time frame depends on the type of debt owed. The statute limitations may be used as a defence in court to have a lawsuit dismissed. Exceptions to state statutes may include federal debt such as government loans, child support, alimony and tax debt. Collection agencies understand laws regarding the statute of limitations and may try to persuade you to admit responsibility for or make payment arrangements on the debt. Making a payment on or agreeing to a payment plan may reset the statute of limitations.
The statute of limitations for delinquent debt appearing on your credit report differs by state. Most negative information remains on your report for seven years. Some bankruptcy judgments may be stay on your credit report for 10 years and unpaid tax liens may remain on your consumer history for 15 years. As with debt, you may dispute information on your credit report and inaccurate information will be removed.
Regardless of your financial liability, debt collectors cannot harass you, use obscene language, lie to you about the amount owed or threaten you with legal actions they have no right to pursue. Collectors cannot call you before 8 a.m. or after 9 p.m. in your time zone. If a creditor contacts people you know seeking your whereabouts, they cannot tell the person that you owe money. Additionally, if you tell a debt collector that your employer prohibits calls, they cannot contact you at work. You may send a "cease-and-desist" letter to a debt collector at any time requesting that they stop contacting you and they must comply. Those letters, however, do not protect you from lawsuits or absolve you from debt.