Old unpaid bills do have a finite lifetime when it comes to legal action against you. Every state has a statute of limitations law on debt collection. After that time, while you may feel you have a moral obligation to settle the debt, the creditor can no longer sue you for payment.
Open- or Closed-End Credit
An open-end credit is one that you use repeatedly, such as a credit card or a home equity line of credit. Payments vary from month to month. Closed-end credit typically revolves around a single transaction, such as obtaining a mortgage for a house or a loan to buy a car, and the monthly payments remain the same. Determine which category your debt falls under, as the statute of limitations may be different based on the kind of credit.
Logic Behind the Statute of Limitations
The statute of limitations is designed to protect the consumer from debt claims that are so old it would be difficult, if not impossible, to defend against the claim. The statute, however, does not necessarily mean the end of any attempt to collect on the debt. It simply means that the debt collector cannot sue you or threaten you with any type of court action.
The debt collector can continue to call, send letters and generally be a pest. Old debt may be sold to law firms and collection agencies for pennies on the dollar, and they will do everything possible to convince you that you must pay the bill. The debt collector probably knows your state’s debt collection laws better than you, so your best conversation or interaction with a debt collector may be no action at all. Some states reset the statute of limitations clock if you make a partial payment, say you will pay when you're in a better financial condition or even acknowledge that you owe the money.
The nonpayment of the debt will be reported on your credit report and can remain there for seven years, even if it's paid. Unless the debt is charged off or you declare bankruptcy, the debt is still yours. If you're thinking about paying or settling a very old debt, consider consulting an attorney first.
Diane Stevens' professional experience started in 1970 with a computer programming position. Beginning in 1985, running her own business gave her extensive experience in personal and business finance. Her writing appears on Orbitz's Travel Blog and other websites. Stevens holds a Bachelor of Science in physics from the State University of New York at Albany.