Consumer debt in the U. S. soared to an all-time high in 2020—reaching nearly $14. 9 trillion, according to Experian data. Approximately 60% of the debt is held by debt collectors, according to a study published by the Urban Institute last year, which estimated that the debt in collections was based on credit reports from 80% of American adults without credit histories.
Sometimes a lender will sell your unpaid debt to a debt buyer or give it over to a third-party collection agency. The agency or buyer will then try to recover at least some of the debt. In some cases, your debt may be sold to yet another collection agency if the person holding it is unable to get the amount owed.
You’re not alone if you’ve ever felt like paying off debt is an endless game of hot potato. When you are in debt, it can feel like a never-ending cycle because different collection agencies may buy and sell your debt. However, what are your rights during this process and how many times can your debt be sold?
Let’s explore the shadowy realm of debt collection in greater detail and learn the truth about debt sales.
Debt Collection: A Complex Web
When you fall behind on payments your original creditor may sell your debt to a collection agency. This agency then attempts to collect the full amount from you, often with added fees and interest. But here’s the catch: your debt can be sold multiple times.
There’s no limit to how many times your debt can be sold. Collection agencies have the ability to purchase and sell debt amongst themselves for as long as it is not paid. Customers may find this to be a frustrating and perplexing experience, particularly if they are interacting with several agencies at once.
Understanding the Statute of Limitations
While there’s no limit to debt sales, there is a statute of limitations that governs how long a debt can be legally collected This timeframe varies by state, typically ranging from three to six years. After this period, the debt is considered “time-barred,” meaning the collection agency can no longer sue you to recover the money.
However, the statute of limitations doesn’t prevent debt sales. The debt may still be purchased and sold by collection agencies even after it has expired. They just can’t sue you to collect it. This implies that even after the statute of limitations has passed, collection agencies may still get in touch with you.
Protecting Yourself from Debt Collection Harassment
Dealing with multiple debt collectors can be overwhelming and stressful. But remember, you have rights. Here are some ways to protect yourself:
- Know your rights. Familiarize yourself with the Fair Debt Collection Practices Act (FDCPA), which protects consumers from abusive debt collection tactics.
- Dispute inaccurate information. If you believe any information on your debt is incorrect, dispute it with the collection agency in writing.
- Negotiate a settlement. If possible, try to negotiate a settlement with the collection agency to reduce the amount you owe.
- Seek legal help. If you’re being harassed or threatened by a collection agency, don’t hesitate to seek legal advice.
Navigating the Debt Collection Maze
Debt collection can be a complex and confusing process. By understanding how debt sales work and your rights as a consumer, you can better protect yourself and navigate this challenging situation. Remember, you’re not alone. There are resources available to help you deal with debt collection and regain control of your financial future.
Additional Resources:
- Federal Trade Commission (FTC): https://consumer.ftc.gov/features/debt-collection
- Consumer Financial Protection Bureau (CFPB): https://www.consumerfinance.gov/ask-cfpb/what-is-debt-collection-en-304/
- National Consumer Law Center (NCLC): https://www.nclc.org/issues/debt-collection.html
Remember, knowledge is power. Equip yourself with the information you need to navigate the debt collection maze and emerge victorious.
What Are Debt Collectors Not Allowed to Do?
The Fair Debt Collection Practices Act (FDCPA) protects you when a debt collector tries to collect money from you for unpaid credit card debt, medical bills, or auto loans. The federal law prevents a debt collector from:
- Contacting you before 8 a. m. or after 9 p. m. unless you let them.
- attempting to contact you at work even though it is not permitted for me to do so
- talking about your debt with anyone other than your partner or a lawyer acting on your behalf However, a debt collector may get in touch with other people to get your address, phone number, or place of employment.
- Harassing you. This involves calling you names or persistently bothering you on the phone.
- lying to you about the specifics of your debt, such as telling you a different amount than you actually owe or making up the fact that you will be arrested
- committing unfair actions, like pre-depositing a post-dated check
When a debt collector violates the FDCPA, you can take the collector to court. If the court rules in your favor, you may receive monetary damages, repayment of legal fees and more.
A statute of limitations governs how long negative information about debt in collections stays on your credit report. A negative entry pertaining to unpaid debt may stay on your credit report for seven years after the debt first became delinquent under the FDCPA.
Theres another debt-related statute of limitations to consider. This one limits the amount of time that a debt collector or lender has to file a lawsuit against you in an effort to get money back from you. The statute of limitations varies from state to state, but its generally three to six years.
Can a Collection Agency Report Old Debt as New?
A collection agency may sell the debt to another collection agency if it has not been successful in getting money from you. However, the debt will retain the original date of the delinquency. Therefore, the collection agency cannot report old debt as new debt.
Lets say the original delinquency date occurred in 2018 but the debt was resold in 2019. In that scenario, the original delinquency date would remain in 2018, not 2019. The duration of this negative item on your credit report is not extended, even though the debt was sold a year after the account first became delinquent.
DO NOT Pay Debt Collectors | How to Handle Debt When It’s Gone to Collections
FAQ
Do I have to pay a debt if it has been sold?
How long can a debt be resold?
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State
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Written
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Oral
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California
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4 years
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2
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Colorado
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6 years
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6
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Connecticut
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6 years
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3
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Delaware
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3 years
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3
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Can you be garnished twice for the same debt?
Why does my debt keep getting sold?
What happens if a debt is sold?
Once your debt has been sold you owe the buyer money, not the original creditor. The debt purchaser must follow the same rules as your original creditor. You keep all the same legal rights. They cannot add interest or charges unless they are in the terms of your original credit agreement.
How long can a debt collector Sue You?
There’s another debt-related statute of limitations to consider. This one restricts the window of time during which a lender or debt collector can sue you in an attempt to recover money from you. The statute of limitations varies from state to state, but it’s generally three to six years. Can a Collection Agency Report Old Debt as New?
What is the Statute of limitations on debt?
The statute of limitations on debt varies by state and type of debt, ranging from three years to as long as 15 years. Below is a list of each state’s statute of limitations on debt to help get you started — but be aware that credit card issuers sometimes argue in court that the law in their home state (not yours) is what should apply.
Should I Sell my unpaid debt to a debt collection agency?
Having your unpaid balance sold to a debt collection agency might mean that you don’t need to deal with the original creditor anymore, but you can rest assured that the debt collectors are unlikely to rest until you pay what is owed.