Desperate times call for desperate measures.
At least that's what some collection agencies seem to think.
Now this is only anecdotal evidence, but I keep hearing about friends who have been contacted by a collection agency that is trying to collect an old debt.
When I say old, I mean more than 6 years old, a debt that hasn't been paid, or billed, in more than 6 years.
And I mean old not just in my eyes, but in the eyes of the law, as well.
In New York, the law says that after 6 years, (sometimes even 4 years, in the case of store credit cards), a debt that has not be pursued by the creditor is too old to collect on.
This is what is known as a "statute of limitations.
" So why would a collection agency contact someone and try to collect one of these old debts if the statute of limitations has run? Because they can.
Some states extinguish these debts after the statue of limitations has expired, and making it illegal to pursue them.
That's not the case in New York.
Here, collection agencies can try to collect these old debts, even sue on them, and it's up to the borrower to prove that the statute of limitations has run, as a defense in a legal proceeding.
So what good is having a statute of limitations if the collection agencies still won't leave you alone? The answer is you don't have to pay a dime on a debt on which the limitations period has run.
No matter what the collection agency tells you.
"Just start sending us $5.
00 a month," they might say.
Well, my suggestion is, if the limitations period has expired, don't fall for it.
You see, once a debt is too old to collect on, your obligation for the entire debt can be revived if you just send in any payment on the debt.
That $5.
00 they urge you to send in to make peace with a collection agency may wind up costing you a bundle, depending on the size of this old debt.
Because any payment on the old debt starts the running of the 6 year statute of limitations period all over again, as if you just defaulted on the debt today.
That gives the collection agency a valid claim to the entire amount of the debt, and that deprives you of your very valid statute of limitations defense if they should take you to court.
Now, if you're not sure if the statute of limitations has expired, say if you don't know exactly when the debt when into default status, and it could be a close call, you need to do your due diligence and get the facts about your obligations on this debt.
And I'm not suggesting, either, that calls from a collection agency should every be ignored, especially if you are trying to clean up the wreckage of the past and take responsibility for your financial affairs.
Old debts do eventually meet their end, no matter what a hungry collection agency representative might tell you.
The law encourages finality in all transactions, and if a creditor failed to prosecute its rights for too long, eventually, the statute of limitations will prevent them from pursuing you.
It's just an evenhanded way of making sure that the creditors don't stand around until the economy goes south, and then try to unearth long-forgotten obligations whose natural legal life has expired just to make up for the shortfall from, say, too many uncollectable mortgages.
So what can you do if you get one of these dunning phone calls or letters after the expiration date has come and gone? First, I always encourage people to communicate with their creditors, as long as the communications are civil, and don't border on harassment on the part of the creditor or collection agency.
Next, make sure that you have your facts straight: know who the creditor is, how much do they claim you owe, and when did the debt go into default.
If you are certain that the statute of limitations has expired, contact the creditor or collection agency and let them know.
Be sure not to make any partial payments on the debt till you get clear on your facts.
And, of course, if things don't make sense, and you're not getting anywhere with the creditor on your own, be sure to contact an attorney who understands the rights and obligations of consumer debtors.