Debt collections are one of the most dreaded phone calls a person can receive. They come at inconvenient times and can even be intimidating. For the past few years, the Federal Trade Commission has received an increasing number of complaints against debt collectors. While the FTC investigates violations of the Fair Debt Collection Practices Act, they want consumers to know a few key points about their debt.
Age of Debt
It isn’t uncommon for a consumer to go many years before hearing from a debt collector. When debts slip through the cracks or a debt resolution attempt fails, these debts can sit dormant in an account for months to years before ever coming to the attention of a collector. For the consumer, this means a false sense of security and increased confusion when the collection attempts begin. Luckily, there is a statute of limitations for collecting debts. However, there are also a large variance in these statutes depending on the type of debt and state of origin. In general, the statute of limitations for collecting on a debt can be anywhere between two to fifteen years.
Type of Debt
There are two main types of debt: open ended, or revolving, and close ended accounts. A credit card is an example of an open ended, or revolving, account. Because these debts hold a signed contractual agreement against the debt, they can result in lawsuits for non-payment. Medical bills are an example of a close ended account. Close ended accounts are typically payable at the time services are rendered or within 30-90 days. Unless a separate agreement is made with a close ended creditor, these debts can be disputed if repeated collection attempts have been made after the state’s statute of limitations has expired. However, anyone who cannot afford to repay a debt should know that acknowledging the debt or making a small payment towards the debt can restart the clock on the statute of limitations. Instead, consumers are advised to seek counsel from a bankruptcy attorney or financial expert.