Saturday, March 29, 2014
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Can You Reset the Statute of Limitations on a Debt
If there is one thing that trips people up the most about the statute of limitations on debt collection, its whether or not the time frame can be reset and, if so, when.
Can You Reset the Statute of Limitations on a Debt
Essentially, yes, actions you take can reset the statute of limitations and open you up to a lawsuit once again. Keep in mind, however, if the collection agency files a lawsuit against you and you attempt to use the statute of limitations defense in court, the company will then have to prove that you did, in fact, reset the statute (more on that in a minute).
You Can Reset the Statute of Limitations on Debt By Making Payments
A debts statute of limitations is essentially the time-clock on a dormant debt. As long as that debt remains dormant, the clock continues to tick. Should you make a payment on the debt, this "reactivates" the account. Because the debt is no longer dormant but is now active, the statute of limitations ceases to matter. If and when you once again default on your payments, your states statute begins anew.
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| Dont reset the clock! |
Now, before I go any further, I will say that supposedly in some states a debtor can unintentionally reset the statute of limitations by promising to make a payment, even if he doesnt ever actually submit one. This is iffy at best. Even in a case where the states laws allowed such a thing, the collection agency would have to provide proof that the debtor made such a promise. Granted, collection agencies record telephone calls, but the idea that they would maintain those telephone records for long enough to use them as lawsuit fodder is also a relatively sketchy concept.
Earlier today, I stumbled upon a post that absolutely disgusted me. A self-proclaimed "credit guru" who seems to be plastered everywhere I look online these days was telling some poor girl that by merely talking to a debt collector about a ten year old debt, she had already reset the statute of limitations. This, of course, is complete and utter BS.
AAAAAAHHHHH!!!
Frustrating. In reality, it isnt that hard to look up the specific statutes for your states. Most states provide individuals access to the law codes online.
Resetting the Time Frame on an Old Debt
If you have a debt that is owned by a collection agency yet is time-barred, send the collection agency a Cease and Desist letter and forget about it. Pull your free credit report three times a year (one every four months. Its still free as long as you dont pull the same bureaus report twice in a year) to make sure the collection agency hasnt gotten sneaky and pursued a default judgment on the sly and then leave well enough alone. You cant reset the statute of limitations if you dont take initiative to do so.
Be warned, however, debt collectors will pull every trick in their arsenal to try and trick you into paying anything you possibly can so that youll once again be open for a lawsuit. Dont fall for it.