How do I Handle Old Debt?

Legally, old debt, such as an extremely past due credit card bill, should fall off your credit report after seven years. The amount of time creditors have to sue you over failing to pay your debt can vary from state to state, but it usually expires within six years. That doesn't stop some debt collectors from trying to get their money, even a decade later. If you have an old debt you never paid, keep your cool when dealing with collectors.

Step 1

Order your credit reports from each of the credit reporting bureaus. Study the reports to make sure that any debt more than seven years old doesn't appear on the report. If it does, contact the bureau to dispute the item.

Step 2

Research your state's statute of limitations. There are four types of debt: oral contracts, written contracts, promissory notes and open accounts, which are typically credit cards. The number of years in the statute of limitations varies for each one. Even if you got a credit card while living in another state, look up the rules for the state you currently live in. Once the statute of limitations passes for your debt, you can't be sued for it. Keep in mind that there is no statute of limitations for federal student loans under section 484A(a) of the Higher Education Act.

Step 3

Stay calm if a debt collector calls you about an old debt. He may say some scary things over the phone or sound threatening, but in most cases, you are in the position of power, especially if the debt is past the statute of limitations. Don't admit to the debt, or you risk resetting the statute. For instance, if a collector calls you about a debt that is 10 years old and gets you to say you you are aware of the debt and that you owe it, the entire statute of limitations period starts over from day one. You can now be sued for the debt and it will once again appear on your credit report, to remain there for another seven years.

Step 4

Ask the debt collector to send you proof in writing of the debt, including the amount and to whom the money was originally owed.

Step 5

Dispute the debt, in writing, if you believe it is a mistake or something you already paid. Experts at Bankrate recommend sending this letter via certified mail so that the debt collector can't deny ever receiving it. After you dispute the debt, the collector has to verify it or else never contact you again.

Step 6

Write a letter to the collector requesting that they cease contact with you if the debt is past the statute of limitations. You legally cannot be sued for the debt and at your request, they legally cannot contact you about it.

Step 7

Pay the debt if you feel morally obligated to or if the debt isn't past the statute yet, but act carefully. You may want to try offering a single, lump sum payment in exchange for confirmation that the debt has been paid. If you can't afford that, try to work out a payment arrangement for the debt. Don't just throw money at the debt now and then, though. If it's past the statute, doing so can reset the clock and make you liable to be sued again.

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