What Is Time-Barred Debt? Definition and Examples

Time-barred debt is old debt for which debt collectors can no longer sue you for repayment because the statute of limitations has passed. However, that doesn’t mean that the debt disappears entirely. Keep reading to learn more about what time-barred debt is, how it works and what you should do if you have older debt in collections.

What is time-barred debt?

The term “time-barred debt” refers to any debt that is uncollectible because the statute of limitations period for collecting it has passed. Like any debt, this phrase speaks to money that you’ve borrowed and didn’t repay. However, with time-barred debt, debt collectors can no longer sue you for payment once enough time has passed.

Still, it’s worth noting that debt doesn’t vanish just because you can no longer be sued over it. You still owe the debt, but you can’t have your wages garnished because of it, and any collateral you’ve put up can no longer be seized.

Each state has its own rules for how long debt remains collectible. For the most part, statutes of limitation on debt last between three and six years, but in some cases, it may be longer. In Rhode Island, for example, the statute of limitations extends to 10 years. Additionally, some forms of debt, like federal student loans, don’t have a statute of limitations at all.

Example of time-barred debt

Let’s say you live in Delaware and you have $5,000 of credit card debt, but you are financially unable to keep up with the monthly payments, so your debt is eventually considered delinquent. If after four years, a debt collector tries to file a suit against you for payment, it will likely be thrown out because the statute of limitations in Delaware is only three years.

That said, the debt will still remain on your credit report for up to seven years and will likely negatively impact your credit score and your ability to borrow money again in the future.

How does time-barred debt work?

As explained above, the law distinguishes between debt that is still able to be collected and debt that is no longer eligible for collection because of its age. However, borrowers need to be careful about how they respond to requests for repayment. A wrong move could have unintended consequences.

For instance, even though it is illegal, debt collectors can still attempt to sue you for time-barred debts. Although a lawsuit by a debt collector should be thrown out once it gets in front of a judge because the statute of limitations has passed, it is still in your best interest to respond to the summons, rather than simply ignoring the lawsuit.

At the same time, you’ll likely want to avoid making any payments on the debt or even acknowledging in writing that it’s yours. In some cases, claiming the debt in writing or making a partial payment toward it could reset the clock on its time-barred status. If this happens, the statute of limitations would need to run out again and the debt collector would be able to sue you for the full amount during that time, plus interest and fees.

When does debt become time-barred?

There is no one-size-fits-all answer to when a debt becomes time-barred. Each state sets its own statutes of limitation and they can be different for each form of debt. Credit card debt might have a different statute of limitations in your state than mortgage debt or medical debt.

However, in any case, the clock on time-barred debt usually starts from the date of your first missed payment.

With that in mind, if you have older debts that you can’t repay, it may be worth researching your state’s statute of limitations. Doing so can help you have a better idea of how to respond to debt collectors if they try to contact you.

How to tell if debt is time-barred

Unfortunately, no one is going to let you know when the statute of limitations has run out on your debt. It’s up to you to figure out whether enough time has passed. Fortunately, it’s possible to do so with a little research and some basic math.

Here’s what you need to do:

1. Obtain a copy of your credit report: This will help you determine which debts are delinquent. You can access a copy of your credit report from each of the three credit bureaus by going to AnnualCreditReport.com.
2. Find the date of your first missed payment: Look back in your records to determine the date of your first missed payment toward that specific debt. You’ll use this date to help determine whether it has reached the statute of limitations.
3. Research your state’s statutes of limitation: Again, each state has its own laws to determine when a debt becomes time-barred.

What to do about time-barred debt

If your debt has reached the statute of limitations, you might be wondering if you should pay it. Here are your options:

• Pay nothing: You can’t be sued over this debt. However, debt collectors can continue to try to collect it. If you choose to go this route, be aware that the past-due payment information will typically remain on your credit report for seven years. It will negatively impact your credit score, which can make it more difficult to open a line of credit, get a loan or even rent an apartment in the future.
• Settle the debt: You may be able to settle the debt for less than what you owe by negotiating with the debt collector. If you’re interested in pursuing a debt settlement, get a signed agreement from the collector that confirms you’re settling the debt before you make a payment. If you don’t have a signed agreement, it might look like a partial payment on the debt, which could restart the clock for when the statute of limitations expires.

Keep in mind that if you settle your debt for less than what you owe, it could still negatively affect your credit for up to seven years. However, you may be able to request that any negative information be removed from your credit profile during the negotiation process.