Gerri Detweiler has been helping consumers find answers to their credit questions for more than twenty years. She serves as Credit Advisor for Credit.com, and her newest book is Stop Debt Collectors: How to Protect Your Rights and Resolve Your Debts.
Dealing with Debt Collectors
Recently I had the opportunity to join Carmen as she helped Brandi create a plan to get her financial life back on track. Brandi is a college financial aid officer who said that she tries to help students avoid the same mistakes she’s made. She is juggling student debt, collection accounts for unpaid credit card debts, and she’s the mother of a young child. Plus she’s planning on going back to school to get her Master’s degree!
Brandi is concerned about numerous old, unpaid collection accounts listed on her credit report. She told Carmen she wants to clean up her credit and resolve these debts.
When I reviewed Brandi’s credit reports from all three major credit reporting agencies I found two problems:
1. Numerous discrepancies between the way collection accounts were listed on her credit reports, and
2. Many of those collection accounts did not list the original date of delinquency, which is required by law, and essential to her strategy (more in a moment).
Brandi has a little money in savings and is thinking about settling these accounts, but before she does, I want her to understand a few things about how collection accounts work.
Paying Old Collection Accounts
In every state, there are laws covering the “statute of limitations” for different types of debts. If a creditor (or collection agency) sues you after the statute of limitations has expired, you can raise the statute of limitations as a defense and the person suing you will lose the case. Some debt collectors don’t pay attention to the statute of limitations, though, and try to collect anyway. In some states, if you make a payment – even a small, token payment to get the collector off your back – the statute of limitations can start all over again.
Brandi needs to understand the statute of limitations in her state, New Jersey, is six years. So unless she has made a payment or promised to pay on those old debts in the past six years, they are too old to be collected.
I want to point out that I am not trying to help Brandi wiggle out of her debts. But she has a limited amount of money to work with right now, and if she starts paying all those old debts, she is going to open a can of worms. I’d like to see her become financially stable before she starts trying to resolve the older items.