Debt Collection

How to Avoid Resetting the Clock on Old Debt

Once a debt is past a certain age, collecting on that debt through legal channels is barred under Florida’s statute of limitation laws. However, if the person owing the debt is not careful, the debt can be reset, making the amount owed legally collectible once more. Knowing what to do to prevent that from happening is important for this reason.

Understanding the Statute of Limitations

Every state has a set of laws that governs how long a person or entity has to bring a legal claim on any given issue, including debt collection. If a claim is brought after that period has passed, the claim will likely be barred. When it comes to debt collection, this timeline is five years from the date the debt began for written contracts, including personal loans. If the debt is one with a revolving account, including credit card debt, the statute of limitations is four years.

Debt collectors often hope that the consumer is not wise enough to know the laws behind debt. They are very persuasive when communicating with consumers and often use fear tactics to get the person to make payment again. The problem is, once this payment is made, the clock restarts on the debt’s statute of limitations, making it once again legally collectible.

Verify the Debt

To see if the debt is past the statute of limitations, it is important the consumer knows the details surrounding the amount owed. The consumer owing the debt has the right to request written verification of the account from the person contacting him or her. Once this written information is provided, the consumer has 30 days to officially dispute the debt. Another way to determine when the debt originated is to pull this information from the consumer’s credit report. Disputing the debt does not restart the clock for the statute of limitations, so consumers should not be fearful to fight the debt. Requesting written verification or validation of the debt similarly does not restart the statute of limitations time period.

Restarting the Clock

Certain behavior can restart the clock for the debt’s statute of limitations. One way is to make a payment on the debt. Debt collectors will try their best to convince the consumer to make either a partial or full payment over the phone, even if they are aware that the consumer is not legally obligated to make payment. By making this payment, even if it is a small amount, the debt clock restarts. Similarly, they may try to at least get the consumer to agree to pay the debt and acknowledge that it is his or her debt to pay. Be cautious with what statements are made over the phone with the collector. The consumer should never outwardly agree that he or she owes the debt. This statement could be used against him or her later.

Another way to restart the debt’s clock is to use the old account to make a new purchase. For example, if the consumer owes on an old credit card that has not been paid in several years, using the card again not only adds to that amount, but it also restarts the statute of limitations for the entire amount owed.

Even though the consumer is not legally obligated to pay on the debt, the statute of limitations does not prevent the debt collector from trying to collect on the account. This fact is why consumers are often confused as to why a collector is pursuing collection on a debt that is decades old.

Old Debt and Your Credit Report

While the debt may not be legally collectible, if the consumer has defaulted on paying it, what is owed will have a negative effect on the person’s credit score. Defaulted debt can harm a consumer’s credit score, and it will stay on there unless the amount is either paid off in full or enough time has passed before the debt eventually falls off. Normally, defaulted debt remains on a consumer’s credit report for seven years, even if it is past the statute of limitations. If a consumer is hoping to seek financing for a new purchase and is worried this old debt will harm his or her chances, it may be advisable to pay the debt off, only if the consumer has the funds through which to do so.

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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

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