How to Avoid Resetting Old Debts

As debts get older, they start to affect you less and less. The impact to your credit score isn’t as heavy and the likelihood of a lawsuit decreases, too. Eventually, old debts will drop off your credit report completely and they will no longer be legally enforceable. But, there are certain things you could do to reset the clock on a debt and give it more life. Unless you’re prepared to pay off an old debt, you’ll want to avoid resetting the clock on it.

The Statute of Limitations on Debt

The statute of limitations for a debt is the amount of time that debt is legally enforceable. In other words, it’s the amount of time that a debt collector can use the court to force you to pay a debt. The statute of limitations depends on your state and the type of debt. The time period ranges from 3 to 15 years. Typically, the statute of limitations is between 4 and 6 years.

The clock on the statute of limitations starts ticking on the last date of activity on that account. The activity could be a payment or payment arrangement made on the debt, a charge made to the account, or even acknowledging that the debt is yours.

You may be able to estimate the last date of activity by checking your credit report, but keep in mind that not all account activity is reported to the credit bureaus. For example, if you spoke with a collector about a debt and admitted to the debt, that wouldn’t be reported to any credit bureau. However, that statement could reset the statute of limitations giving the debt collector more time to sue you.

So what should you do to avoid resetting the clock for the statute of limitations? Essentially, everything. Make no payments toward the debt. Don’t make any payment arrangements on it. Don’t admit that the debt is yours. Don’t use the account anymore. The debt remains dormant and eventually, the statute of limitations will run out.

The Credit Reporting Time Limit

What about old debts on your credit report? The credit reporting time limit for negative accounts is separate from the statute of limitations. That time period is seven years, no matter what. Even if you make a payment on an account, the negative information associated with the account will still fall off your credit report after seven years. The exception is bankruptcy and unpaid tax liens. Bankruptcy can stay on your credit report is for up to 10 years and unpaid tax liens can stay indefinitely.