Did you know that after a while debts become too old to legally collect? If you are an industry insider, you are mouthing "yes, duh, of course I know all about statutes of limitations." If this is you, enjoy that warm feeling of knowingness. If this is not, let me tell you: debts can become too old to legally collect. Here is some information about how and when debts become too old to collect anymore.
Here is a list of every state's debt expiration date, courtesy of Bankrate. Do you live in Kansas? Your debts can't be collected anymore after three years of non-payment. Do you live in Kentucky? Your state government prefers the plush company of credit tycoons to its own citizens, and has set the limit at 15 years. Tennessee is only six years, if you're looking for somewhere close by that is similarly shaped.
Now, when I say "collect" I mean "be sued for." While you can't be sued for an expired debt, debt collectors can still call you up and try to harass you into paying or, more ironically, play to your sense morality and ask you to pay voluntarily. There are entire collection companies that make their buck collecting these incredibly low-priced expired debts, such as the company in Bad Paper, a book about collectors that I reviewed two weeks ago, which is short and good and you should read it.
All this suggests the question: morally, do you owe debts after their expiration date?
No, you do not. When you signed a contract for your credit card, you gave your bank your word that you would pay them back for any money they lent you, plus interest, and agreed that if you didn't, they would be able to sue you for your debt or sell it to a professional suer, up to a certain point. You both signed a contract with a morality expiration date. Your bank knew this. Your bank helped your state legislature set the expiration date. When your bank, or the collector they sell your debt to, sleeps at the wheel and lets a debt lapse, they have failed only themselves. They have failed to enforce their rights, and you do not owe them a penny for this. This is their problem. If the roles were reversed, would your bank pay you back after the expiration date? Your bank would fight you to the Supreme Court to not have to pay you back. Devotees of Any Rand shout this from the rooftops: in our postmodern, objectivist society, acting in a way other than in your own rational self-interest is morally wrong. Paying a debt that cannot be forcibly taken from you is wrong and inefficient, and, in some subtle economic way, hurts society. Do not do it.
The Sixth Circuit Federal Court of Appeals ruled last month that collectors must tell you when your debt is expired-- that it is misleading to withhold this critical information from people. If a collector calls you up and says that you owe $4,934 on a credit card you took out in the Clinton Administration, and then adds, in a clipped, monotone collector script, that this debt "can go ahead and no longer be within the statute of limits for collection accounts" or some such gibberish, hang up the phone and write them a letter immediately telling them never to speak to you again. This is the only right way to handle expired debts.
Bennett Hartz is an associate attorney at Drewes Law, PLLC who defends against debt collection and foreclosure. He can be reached by email at email@example.com.
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