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Are you worried about a collection agency reopening a closed account and resetting the clock on your old debt? You’re not alone. Many people are concerned about this issue, and it’s important to understand how it works so you can protect yourself.
In this article we’ll explore:
- How old debt works and how it can be “reopened” by collection agencies.
- What you can do to avoid resetting the clock on your old debt.
- Your rights when dealing with old debt and collection agencies.
- Frequently asked questions about old debt and resetting the clock.
By the end of this article you’ll have a better understanding of how to protect yourself from collection agencies and keep your old debt from coming back to haunt you.
How Does Old Debt Work?
Old debt is any debt that is past the statute of limitations in your state. This means that the creditor can no longer sue you to collect the debt. However, the debt can still be reported on your credit report, which can negatively impact your credit score.
Collection agencies are businesses that buy old debt from creditors for a fraction of the original amount, They then attempt to collect the debt from the debtor
Here’s how collection agencies can “reopen” a closed account and reset the clock on your old debt:
- Making a payment on the debt. This acknowledges the debt and resets the statute of limitations.
- Agreeing to pay the debt in writing. This is the same as making a payment.
- Charging an old account to a new credit card. This can also reset the statute of limitations.
It’s important to be aware of these actions so that you can avoid resetting the clock on your old debt.
How to Avoid Resetting the Clock on Your Old Debt
There are a few things you can do to avoid resetting the clock on your old debt:
- Do not make any payments on the debt. This includes making partial payments or agreeing to a payment plan.
- Do not admit to owing the debt. This includes verbally acknowledging the debt or signing any documents that acknowledge the debt.
- Do not charge the debt to a new credit card. This will reset the statute of limitations on the debt.
- Check your state’s statute of limitations for debt. This will tell you how long a creditor has to sue you to collect the debt.
- Dispute any errors on your credit report. This includes any debts that are past the statute of limitations or that you do not owe.
By following these tips, you can help to protect yourself from collection agencies and keep your old debt from being reopened.
What Are Your Rights When Dealing with Old Debt?
You have several rights when dealing with old debt, including:
- The right to be informed of the debt. The collection agency must send you a written notice that includes the amount of the debt, the name of the original creditor, and the date of the last payment.
- The right to dispute the debt. You have the right to dispute the debt if you believe that you do not owe it.
- The right to be treated fairly. The collection agency cannot harass you or use abusive language.
- The right to privacy. The collection agency cannot share your personal information with anyone else.
If you believe that your rights have been violated, you can file a complaint with the Consumer Financial Protection Bureau (CFPB).
Frequently Asked Questions About Old Debt and Resetting the Clock
Here are some frequently asked questions about old debt and resetting the clock:
- Can a collection agency sue me for old debt?
Yes, a collection agency can sue you for old debt, even if it is past the statute of limitations. However, if you win the lawsuit, the collection agency will not be able to collect the debt from you.
- What happens if I ignore a collection agency?
If you ignore a collection agency, they may continue to contact you and report the debt to the credit bureaus. This can negatively impact your credit score.
- Should I pay off old debt?
Whether or not you should pay off old debt is a personal decision. If you can afford to pay it off, it will improve your credit score. However, if you cannot afford to pay it off, you may want to wait until the debt is past the statute of limitations.
Dealing with old debt can be stressful, but it’s important to understand your rights and how to protect yourself. By following the tips in this article, you can avoid resetting the clock on your old debt and keep your credit score from being negatively impacted.
If you have any questions or concerns, be sure to contact a credit counselor or attorney for advice.
Don’t admit to it
If debt collectors contact you trying to get you to pay up, be mindful of your language. Inquire about the initial creditor, the time frame within which the previous debt occurred, and any other relevant details. But try not to admit that it’s yours. Even if it is, you can choose to pay when the debt becomes time-barred, which closes the statute of limitations window, rather than having the statute of limitations run again.
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- Don’t pursue your debts in court; instead, wait for the statute of limitations to expire, which usually happens in three to six years, to avoid future legal problems.
- To prevent your debt from being counted again, note the date when it was first reported delinquent, avoid making any admissions about it, and research your state’s laws.
- If you charge an old account, agree to pay the debt, or make a payment, the statute of limitations on your debt may begin anew.
After three to six years, some debts will “expire,” which means a debt collector can no longer bring legal action against you. Nevertheless, there are certain actions you can take to extend the life of previous debt beyond what is necessary. If you’re dealing with old debt, ensure you’re taking the right steps to avoid starting over.