When a debt reaches a certain age, it becomes unenforceable by the creditor. However, this does not mean that demands for these debts will automatically stop: on the contrary, some debt collectors will buy old or ‘time-barred' debts at very low cost and pursue debtors for payments. Often these debt collectors will use questionable and even illegal methods to try to retrieve money from debtors.
Incurring Debt
There are numerous ways in which people can incur debts: through an unwritten (oral) contract, a written contract, or promissory note. Although they are more difficult to prove, oral contracts are legal and enforceable. Written evidence of a debt, that is signed by both lender and debtor (and dated) is better proof of a debt, and a promissory note is a loan that defines in the contract the term and repayments of the loan (for example a mortgage.) It is important to note that credit cards and store cards are open-ended accounts. With open-ended accounts the statute of limitations will run on the date the payment on the account was due, and not from the date on which you opened the account.
Statute of Limitations on Debt
The age after which a debt stops being unenforceable is prescribed by state law and applies to debts given by individuals, companies, banks and other entities. Generally this period of time is six years, although there are some states that provide various periods ranging from between 2 to 15 years so it is important to check the laws of your particular state. The reason for the imposition of these limits is twofold; firstly so that people don't live their entire lives with the threat of being sued, and to ensure that if they are sued they will be in a position to gather (relatively fresh) evidence to defend themselves.
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However, the statute of limitations does not prevent a creditor from trying to sue you to recover the debt, it simply means that you can apply to the court to have the case dismissed because the claim is time barred. Collection agencies may suddenly start to issue threats of litigation when the statute of limitations is about to expire.
Protecting Yourself from Old Debt Collectors
If you are contacted by a debt collector over an old debt it is very important that you do not admit to anything. The best way to deal with this type of demand is to tell them that "the statute of limitations has expired on this debt" and that you do not expect to hear from them again. Under no circumstances should you admit that you owe the debt, and neither should you agree to pay them any money or any part of the debt. These admissions could mean that you are no longer afforded the protection of the statute of limitations, which could begin to run again.
