In the wake of the FTC’s settlement with debt buyer Asset Acceptance, the regulatory agency has published a consumer alert regarding time-barred debts. Essentially, debt buyers purchase debt portfolios for pennies on the dollar, and may then go to any length to collect on the debt. Often, the debts in question are past the statute of limitations. This means that the debt collector can’t sue the consumer in court and obtain a judgment against him or her. An ancillary problem is that often, by the time the debt buyer purchases the debt, documentation about the original debt is scarce or non-existent. This results in debt collectors going after the wrong person – perhaps someone who currently has a phone number once associated with the account, or a person with a similar name to the consumer who originally owed the money. All too often, debt buyers threaten consumers with lawsuits over time-barred debt and place negative items on their credit reports – both of which are illegal.

You can find the full FTC Consumer Alert here: http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt144.shtm

However, here are some highlights:

* State laws vary regarding the statute of limitations; most states have three- to six-year statutes of limitations, but some are as long as ten years.
* If you ask a debt collector if a debt is past the statute of limitations, he must answer truthfully.
* In many states, if you make any payment at all on a time-barred debt, it “resets the clock” and the debt once again becomes current. This means that the debt collector can take you to court and obtain a judgment against you.
* If you’re sued for a time-barred debt, go to court and tell the judge. If you don’t defend yourself, the judge will likely rule in the debt buyer’s favor and a judgment will be entered against you.
* If a collector sues you or threatens to sue you for a time-barred debt, talk to a fair debt attorney. You can sue for violation of the Fair Debt Collection Practices Act.