Americans are carrying right now, due, in large part, to how tough the economic landscape has become. Inflation remains high, pushing up the prices of essentials, so more people are relying on short-term borrowing options, like credit cards, to fill in the budgetary gaps. And, other issues, and high-rate landscape, are adding to the pressure borrowers are facing, making it difficult to stay current or catch up on the revolving balances they're carrying, especially as the interest charges compound.
In many cases, however, today's financial pressures aren't limited to the debt borrowers have accumulated recently. For some, the pressure actually stems from old credit card bills or unpaid accounts that resurfaces after a collection agency calls or sends a letter demanding payment. There are rules governing how long creditors and debt collectors have if they want to use the courts to pursue payment, though, which means the age of the debt can make a major difference in what happens next for borrowers — and dictates what steps they should take to resolve the issue.
But it can also make it difficult to decide what to do with an old collections account. Paying the balance may seem like the simplest way to deal with the issue, but sending money without understanding the debt's status could have surprising consequences. So, before you pay collections debt that's years old, here's what to consider.
Should you pay collections debt that's past the statute of limitations?
The short answer to whether you should pay a collections debt that's past the statute of limitations — commonly known as a time-barred debt — is that it ultimately depends on your circumstances. That said, you generally shouldn't make a payment on any collection account until you've verified the debt and determined how your state's laws apply.
That's because the statute of limitations establishes how long a creditor or debt collector can generally sue you to collect a debt. And, that timeframe varies based on factors such as the type of debt, and, in some cases, the state law specified in your credit agreement. While many statutes of limitations range from three to six years, some can be longer.
Once that period expires, federal debt collection rules prohibit debt collectors covered by the Fair Debt Collection Practices Act (FDCPA) from suing or threatening to sue you over the time-barred debt. That doesn't necessarily mean the debt is forgiven, however. Depending on state law, debt collectors may still be able to contact you and ask you to pay voluntarily.
That's where caution becomes important. In some states, making even a small payment on the unpaid balance — or, in certain cases, acknowledging the debt in writing — can . That could potentially give the debt collector a new opportunity to sue for the remaining balance.
So, before deciding what to do, here's what to consider:
- How old the debt actually is:Ask the debt collector when its records show you made your last payment, then determine which statute of limitations applies.
- Whether the debt is still on your credit reports:Most negative information can generally . Paying a time-barred debt won't necessarily remove that history prior to the seven-year mark.
- Whether you want to settle the account:You may decide that resolving the collection balance is worth it, even if you can't be sued for it. If you , though, be sure to get the agreement in writing before paying.
- What state law says about restarting the clock:This is particularly important before making a partial payment or agreeing to a payment plan.
And if you're sued over an old debt, don't assume you can simply ignore the case because the statute of limitations has expired. You may still need to raise the expired statute of limitations as your defense. Otherwise, the debt collector could potentially obtain a default judgment if you don't respond.
What if you have other debts that aren't past the statute of limitations?
If you're also struggling with both old collection debt and newer credit card balances, personal loans or other debts that you can't afford, you may want to consider whether there are better approaches or debt relief options that could help improve your situation.
Working with a credit counseling agency on , for example, could help you reduce the interest or fees on certain debts while streamlining your monthly payments and providing a structured repayment plan. may also be an option worth considering, particularly if you qualify for a loan with better terms than your current debts.
For borrowers facing more serious financial hardship, options like debt settlement — also called debt forgiveness — may be worth considering. That approach involves negotiating with creditors to agree on a lump-sum settlement that's less than the full amount that's owed. A successful settlement saves borrowers 30% to 50% on average compared to the original balance, so it can be worth the risks, but it isn't right for everyone.
Whatever route you take, though, you should be careful about enrolling a time-barred debt in a repayment or settlement program without understanding the implications. Because state laws vary, making a payment or agreeing to repay an old account could alter its legal status.
The bottom line
Paying a collections debt that's past the statute of limitations can make sense in certain situations, but don't assume that paying an old balance is automatically the best financial move. You should take time to verify that the debt belongs to you, determine whether the statute of limitations has actually expired and find out what could happen under your state's laws if you make a payment. If you're dealing with multiple unaffordable debts, it can also be useful to before directing money toward an account that may already be time-barred.