Dear Debt Adviser,
Your article, "Old debts won't hurt new loan," had a lot of valuable information I forwarded to my daughter. Twelve years ago, she was one of those 18-year-olds who was offered numerous credit cards, even though she was only a student. Her story is the familiar one of too much credit and no way to pay it all back. In regard to your article, we had a couple of questions and would very much appreciate your answer.
- She has at least one account that was delinquent and closed more than 10 years ago. She has started getting calls from a collection agency asking for payment. Your article indicated these debts should no longer be on the credit report. However, are collection agencies still allowed to pursue payment?
- She is a single mother of two boys who makes $12 an hour and gets $200 a month total for child support. After rent, utilities and food, she doesn't have the money to pay on this old debt. Can her wages be garnished?
Thank you very much for your help and information.
-- Marlene and Melissa
Dear Marlene and Melissa,
No fair! You're asking two questions on a single dime. Of course I'm only kidding, but adequately answering your questions will take more space than I have for a single column. So I'll answer your first question below and your second question in my next column. Be sure to look for the sequel.
Can the collectors still ask for payment on an old debt? Well, if they didn't ask, they would never get anything. This is the motto of many collection agencies. First, I would encourage your daughter to get free copies of her credit reports at AnnualCreditReport.com. She will need to check to see if any of her old debts are being reported in error. The rule is negative accounts must be removed seven years from the first date of continuous delinquency. Any accounts that fit that criterion should not appear on her reports. If any accounts more than seven years delinquent are reported, she should dispute the item with the credit bureau reporting it. She can dispute items online at the credit bureau websites Equifax.com, Experian.com or TransUnion.com.
A valid debt is collectible until it is paid, but the steps a collector may use to collect the debt change over time. For example, a collector cannot use the courts to collect a debt if the statute of limitations has expired. The statute of limitations for collecting a debt differs by state. You can find your state's laws by visiting CreditInfoCenter.com.
In general, this second debt-related clock starts ticking from the last payment date for the debt -- any payment restarts the statute of limitations countdown. Whether or not the accounts are still legally collectible in the courts depends on when she last made payments on her accounts. If the debt is beyond the statute's dates, I suggest she notify the collector in writing the debt is past the state statute and uncollectible. Be sure to keep a copy and send it certified mail with a return receipt. This should keep the debt from being resold or pursued in court.
Be sure to look for my next column for the answer to your second question about whether her wages may be garnished for this debt.
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