People living in New Jersey and around the country are sometimes contacted by debt collectors regarding very old accounts. In many cases, this kind of contact is legal, but it does not mean that the debt is valid or that the debtor is at risk of a lawsuit or other adverse actions.
When it comes to debt, people sometimes confuse debt collection activity with the length of time negative information can remain on credit reports. In the United States, negative information about most debts can remain on a credit report for seven years. However, a debt remains valid even after information about it is no longer included in a credit report. This means that the original creditor, or collection agency, can continue trying to collect the debt.
There is a restriction: Statute of limitation laws limit the length of time a creditor has to file a lawsuit to collect the debt. In many states, the statute of limitations is as little as two or three years. After the statute of limitations is up, any lawsuits filed to collect the debt can be dismissed.
Individuals who are contacted by a collection agency about a very old debt should first ask the collector for validation of the debt. This is a right that debtors have under federal law. If the debt is no longer collectible because the statute of limitations has passed, informing the collector of this fact may result in termination of collection activity.
Individuals who are concerned about that collection activity may benefit from speaking with an experienced bankruptcy attorney. The lawyer may be able to review the client’s case make recommendations regarding Chapter 7 and Chapter 13 bankruptcy as alternative forms of debt relief.