Most debts have an expiration date. If that statement surprises you, you may be among the many in Texas that debt collectors take advantage of by trying to collect a debt that has already reached its time limit. Time-barred debt includes any debt that is too old for a creditor to collect through the courts. In other words, after a certain time passes without receiving a payment from the borrower, the creditor loses the right to sue for payment.
This does not mean a creditor may not pursue you for payment, and make no mistake, many will. However, it does mean they cannot threaten you with a lawsuit. Additionally, some lawmakers want to change the rules to require debt collectors to inform you when they are trying to collect on a time-barred debt.
Why would disclosure make a difference?
Most people with debt do not realize when their debts expire. When creditors contact them and demand payment, the consumers may not understand what a risky situation they are in. Saying or doing the wrong thing may revive the time-barred debt, reset the expiration date and renew the collector’s right to file a lawsuit for the balance. This can even include debts discharged in bankruptcy. Consumer advocates call this “zombie debt,” and it can wreck any delicately balanced budget.
Some lawmakers are trying to pass legislation that would require debt collectors to inform you when a debt they are trying to collect is time-barred. Until that law passes, you can protect yourself by taking the following steps to avoid dealing with zombie debt:
- If you are uncertain whether you owe the debt, request verification from the creditor.
- Do not admit you owe the debt as this may reset the clock for that debt.
- Do not agree to send a payment since even a small amount can trigger zombie debt, meaning the creditor can sue you for the balance.
- If you know the debt is expired, write a letter to the debt collector requesting that they cease communication with you. You can report them if they violate your request.
Decide if paying off the debt is an option or if trying to settle the debt for a lower amount is worth the effort. This is something you may wish to do only after receiving solid advice about your legal options. In fact, you may wish to learn more about how to deal with your debt situation in a way that relieves you of the burden altogether.