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Understanding Statutory Barred Debt: Definition & Key Insights
Discover what statutory barred debt means, how legal time limits affect debt collection, and key insights for managing time-barred debts. Learn your rights and obligations today.
Statutory Barred Debt: Definition and Meaning
What is Statutory Barred Debt?
- Statutory barred debt is old debt that is uncollectible because the statute of limitations has run out.
- Also known as time-barred debt, it means a debt collector can’t sue you for payment.
- Each state has its own rules for how long debt is collectible, usually 3-6 years.
- Federal student loans have no statute of limitations.
How Statutory Barred Debt Works
- The law separates debt that’s collectible and debt that’s not collectible due to age.
- Creditors and debt collectors may try to sue you to collect a time-barred debt, but it’s illegal.
- If sued, you should respond and don’t ignore it.
- In some states, acknowledging the debt or making a small payment can reset the statute of limitations.
Your FDCPA Rights
- The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates debt collectors for consumer debt.
- Not for business debt, and states have their own consumer protections.
- Debt collectors can’t use abusive, unfair or deceptive practices to collect debt.
- You can tell a debt collector to stop calling you and they must.
How to Identify Time Barred Debt
- Ask the collection company for their records of your last payment.
- Contact your state attorney general’s office for the statute of limitations on your debt.
- The Federal Trade Commission (FTC) can help.
- Check your credit report to see if it’s still on there.
Credit Score
- Like other unpaid debt, time-barred debt will stay on your credit reports and hurt your credit score for up to 7 years.
- Being debt free can have a big impact on your credit profile.
- Collection accounts stay on your credit report for 7 years from the date the debt became delinquent.
Debt Collector Behavior and Time Barred Debt
- Debt collectors can still call you to collect on the debt even if it’s time-barred.
- They may try to get you to pay a partial payment which will reset the statute of limitations.
- Be careful when dealing with debt collectors and know your FDCPA rights.
Paying Statutory Barred Debt
- If your debt is time-barred, you don’t have to pay.
- Paying a time-barred debt can risk the debt not being time-barred anymore and collectors can sue you again.
- If collectors come after you for a time-barred debt, you have options: ignore, dispute or seek legal advice.
Lawsuits and Garnishment
- If a debt collector sues you, you can respond personally or through an attorney and must respond by the date on the court papers.
- A debt collector can take money from your paycheck or bank account if they get a court order, but first they must sue you to get the order.
- Many federal benefits are generally exempt from court ordered garnishment and states have their own laws on what state benefits can be garnished.
Tax Debt and Statutory Barred Debt
- The Internal Revenue Service (IRS) stops collection after 10 years for federal tax debt.
- States have their own statute of limitations for tax debt they are owed.
- Federal student loans, income tax owed, and child support have no statute of limitations.
State by State Statutes of Limitations
- Statute of limitations varies by state and type of debt.
- Debts are categorized into 4 types: written contracts, oral contracts, open accounts and credit card debt.
- Knowing your state’s statute of limitations is key to managing your debt.
Report Abusive Debt Collectors
- You can report any issues with a debt collector to the Federal Trade Commission (FTC) or your state attorney general’s office.
- You can sue a collector in state or federal court if you think they violated the law and you have to file within one year of when they violated the law.
Bottom Line
- Knowing statutory barred debt and your FDCPA rights will help you deal with debt collectors and your credit score.
- Know your state and debt type statute of limitations and how to spot statutory barred debt.
- Seek legal advice if you’re being hounded by debt collectors or sued and garnished.