Time-Barred Debt

DEFINITION of 'Time-Barred Debt'

Money a consumer borrowed and didn’t repay but which is no longer legally collectable because too many years have passed. Time-barred debt is also known as debt that is beyond the statute of limitations. Each state has different rules about the length of time during which a debt remains collectible. In some states, it’s as short as three years, and in others, it’s as long as 10. Creditors and debt collectors may still attempt to sue consumers to collect time-barred debt, but they should not be able to win in court since the statute of limitations has run out.

BREAKING DOWN 'Time-Barred Debt'

The subject of time-barred debt usually comes up when a collector contacts you about repaying an old debt. Because you aren’t legally obligated to repay time-barred debt, you should deal with debt collectors carefully when it comes to old debts. If you acknowledge that you owe the debt or make even a small payment on it, it will no longer be time-barred and you will have to repay it. In fact, a particular breed of debt collectors, called zombie debt collectors, specializes in trying to collect time-barred debts. These debt collectors buy very old debt for as little as 2 cents on the dollar. Then, they get to keep 100% of whatever they manage to collect.

If you owe a debt that is time-barred, you might feel a moral obligation to repay it even if you no longer have the legal obligation to repay it. However, if you pay the debt collector who is contacting you about the money, your payment will not go to the creditor you originally owed money to since that creditor long ago sold your debt to a third party. Still, because bad debts stay on your credit report for seven years, a debt that is time barred can continue to harm your credit score, so there might be practical reasons to repay it even if you don’t have moral or legal reasons to do so.

If a debt collector contacts you about a debt that you think might be time-barred, request written verification of the debt to make sure it’s really your debt. Then decide whether you want to dispute the debt because the statute of limitations has expired, repay the debt because you feel obligated or because you want to improve your credit score, or compromise with the collector by settling the debt for less than you owe.