In the United States, an old debt is considered to be any delinquent account that is typically around 4-6 years old. If you have a debt that you haven’t made any payments on in a few years, you’re dealing with an old debt.
You may be unaware of an old debt until a debt collector calls you or you notice a huge blow to your credit score. Maybe you forgot to pay it off over the years and no longer remember even taking on the debt. If you find yourself in this situation, there are certain steps you can take to ensure that collection agencies don’t make your situation any worse.
So before you make promises and sign agreements to pay back debts that are years old, take a few minutes to consider other options that you may not have known were available to you.
7 Steps You Should Take Before Paying an Old Debt
If you’ve been contacted by a debt collector about an old debt you have, you may be wondering what your options are. Do you really need to pay down the entire loan plus years of accumulated interest? Can you wait a few more years until the account drops off of your credit report?
Here’s a list of 7 steps to consider before agreeing to pay any amount on an old debt. Always remember that you have rights as a consumer, despite what debt collectors may try to tell you.
Step 1: Ask For Proof That You Owe the Old Debt
The first step before paying an old debt is to make sure that the debt is yours and that it is accurate. If you don’t remember the debt in the first place, this may be a good indicator that a mistake has been made.
The best way to formally ask for proof is to send the collection agency a debt validation letter. This letter must ask the collection agency to provide specific documentation that can prove that you owe the debt they’re trying to collect. The proof that you’re asking for will most likely include documents or information directly from the original creditor.
Oftentimes, old debts have been bought and sold many times by different collection agencies, making it rather difficult for them to find documentation from the original creditor. This is great news for consumers that are unaware of old debts and could result in them not having to pay back anything at all.
When you ask for legitimate documentation, the collection agency will often give up on trying to get money from you. Instead, they will focus their efforts on someone less savvy who doesn’t ask too many questions. Don’t be that person, and be sure to always ask for proof in writing. By handling debt collectors in this manner, you can rest assured that you won’t find yourself paying off unnecessary debt.
When to Send a Debt Validation Letter
The timing of your debt validation letter matters. It is important to send it out in the first 30 days after receiving calls or notices from debt collectors.
The Consumer Financial Protection Bureau provides consumers with 30 days to seek validation of debt owed to a collection agency. If 30 days have gone by, the debt collector has the upper hand and can rightfully assume that you do indeed owe the amount they are requesting.
Step 2: Check the Statute of Limitations on Old Debt
If the collection agency can validate your debt, you might want to check into your state’s specific statute of limitations on old debt. If it’s been a long enough time, old debts can expire due to the statute of limitations on debt set forth by your state. In this scenario, the collector can no longer hold you legally accountable for the debt they are requesting.
To look up your state’s statute of limitations on debt, check out our state-by-state guide.
The statute of limitations can many times work to a consumer’s advantage when dealing with debt collectors. It can protect you from being legally liable to pay off a debt that is several years old. However, it doesn’t fully erase that debt. The money owed is still considered debt and credit bureaus will see that debt in your credit report, which can ultimately damage your credit score.
How Statutes Provide Consumer Protections
Expired statutes protect consumers in that they make it impossible for debt collectors to file suit against you in civil court. Sometimes debt collectors will threaten to garnish your wages through legal action, but if you have the statute of limitations protecting you, you don’t need to worry.
Statutes of limitations differ from state to state and are not applied the same to every debt. Some debts might carry a different statute of limitations than others which is why it is important to know how your state handles old debt.
Step 3: Don’t Make the Mistake of Restarting Your Statute of Limitations
While the statute of limitations offers great consumer protections for an old debt, there is a chance that these protections can be taken away if you make this one critical mistake. That mistake is talking about any potential old debt with a debt collector on the phone.
Even the mere acknowledgment of that debt on a phone conversation can result in resetting your statute of the limitation period to day one. This would make you legally responsible for paying any old debt they are seeking repayment for.
Resetting the statute of limitations can make you responsible for that debt for many years, which exposes you to the threat of a possible lawsuit from the collection agency. This underscores the importance of only dealing with debt collectors in writing. Additionally, you should never accept responsibility for the debt in any of your written correspondences with collection agencies.
In your letters, try to avoid using the words “my debt” or “the money I owe.” You want to avoid claiming any responsibility for that debt. Instead, try to use phrases like “the debt” or even “the alleged debt.”
Step 4: Consider a Pay-for-Delete Agreement
If the collector can validate your debt and that debt is beginning to affect your credit score, you might want to look into what is called a pay-for-delete agreement.
A pay-for-delete agreement is a letter written to the collection agency requesting the removal of the collection from your credit report. Collection accounts that show up on credit reports can be seen for up to seven years and can significantly affect your credit. If the collections agency agrees, they will remove the negative information from your credit report in exchange for a fully paid off balance.
Step 5: Use Payment as Leverage
If you’ve made it this far in the process and are considering a pay-for-delete agreement, you can use payment as leverage. Collections agencies trade old debt accounts among themselves for a small percentage of the debt balances they buy off (more on this down below). When they buy an account from another agency, they have a vested interest in that account being paid back in full so that they can make a return on their investment.
If your credit score is suffering due to the collection accounts showing up on your credit history, you can request an agreement to have the information removed from your credit report. In exchange for full or sometimes even partial payment of the debt, the collection agency should agree to remove all late or missed payments from your credit report. They should also agree to remove any information that indicates you were in collections.
Once an agreement with the collection agency has been made, make sure to get everything in writing and send them a check totaling the amount you negotiated. Do not make any payments until there is an agreement in writing!
Step 6: Check Your Credit Report
After securing a pay-for-delete agreement, be sure to check your credit report 30 days after sending in your payment. Make sure that the collection agency held up their end of the deal. If the collection agency failed to delete the negative information from your credit report, you should then gather any necessary documentation of the agreement and send it to the collection agency to remind them to uphold their promise.
If they still aren’t responding to your demands, you may need to contact the Federal Trade Commission (FTC), which directly oversees the Fair Credit Reporting Act (FCRA). This could result in a lawsuit against the collection agency.
Step 7: Hire a Credit Repair Company
Having gone over the various steps you can take when dealing with old debt, it may be more advantageous to hire a professional credit repair company. Hiring a professional can save you time and energy. They are trained to take care of the hassles that come with dealing with collection agencies and can help boost your credit score.
For more information on the subject, check out this article: Should I Hire A Credit Repair Company or Do It Myself?
Why Are Collections Agencies Contacting You About an Old Debt?
In many cases, old debts that haven’t been paid off over a long period of time get sold to a collection agency. Collection agencies assume control over delinquent accounts that haven’t been paid.
Sadly, these agencies’ primary focus is to earn a profit from buying these unpaid accounts for a fraction of the debt owed to them. This can be a great business for them but bad news for consumers who forgot to pay off an old account.
They can do this because they buy from creditors who have given up on getting their money back and can take advantage of obtaining the debt for a low price. After gaining control of your account, they will then begin contacting you to pay off what you owe. If you pay, they earn a profit from the account they purchased at a discount.
This cycle of purchasing debt doesn’t stop with one single agency. Debt collecting agencies can even buy off debt from other collections agencies, making this a vastly lucrative industry.
How to Respond to a Debt Collection Agency
If a debt collector calls you demanding you to pay an old debt, the first thing you should do is tell them that you’d like for them to send you this message in writing. After you have told them that, you can hang up the phone.
Luckily, you as a consumer have certain rights; these rights are laid out in The Fair Debt Collection Practices Act (FDCPA). Debt collectors are notorious for harassing consumers with countless phone calls and mail, sometimes demanding you to pay more than you owe. Their unscrupulous practices are many times illegal, which is why there are measures in place to protect you from their aggressive tactics.
With this in mind, you should NEVER pay a debt collector over the phone. Permitting a debt collector to collect the money you owe them over the phone is often interpreted by a collection agency to mean that they can withdraw the full amount owed to them, even if that amount isn’t accurate. The last thing you want is a debt collector to access your bank account. This is why you should always demand that they send you an official letter laying out what is owed.
Dealing with old debt can be stressful and annoying. No one likes receiving calls from debt collectors regarding a debt from ages ago.
Before you buckle and agree to pay the debt, remember that you have options and rights as a consumer. There are laws in place that you can use to your advantage. Try your best to do some research and get informed on the situation at hand.
Most importantly, be patient with yourself and with the process. If you’re able to get a grip on what your rights are and take steps to rectify the situation, good things are sure to follow.