Debt Free

Times were tough in college. You ate more than your share of Top Ramen and white rice, walked because you were too poor to take the bus, lived for a time in mini storage, and took showers at the athletic department. Ah, those were the days. Sadly, there were times when you simply had no money to pay your bills, and a few bills ended up in collection when you defaulted. Things got so much better when you graduated, got your first real job, and started advancing through the ranks in the business world. You were making great money, and your credit was solid gold. 

Then, after you’d left college a decade behind in your rear view mirror, you got a collection call about an unpaid debt. The call was from a collection agency that had purchased the debt from the original creditor. This is actually a fairly common practice. Old debts will be purchased form the original creditors for pennies on the dollar, with the expectation that most will remain uncollectible, but some will bear fruit.

What happens in this instance? Well, if your conscience nags at you sufficiently, you can write a check, but don’t do it because the collection agency is doing the nagging. Once you’ve passed the statute of limitations of the debt going into default, you are legally home free, and have no obligation to repay the debt. When that is, precisely, varies by state and the type of debt you incurred. Typically, unpaid debts are classified for this purpose as Oral Agreements, Written Contracts, Promissory Notes, or Open Accounts.

The average for the statute of limitations is about 6 years, but it varies widely by state. For example, Rhode Island and Wyoming have a 10 year statute of limitations on open account (such as credit card and revolving account) debt, while Washington, North Carolina and New Hampshire let you off in 3 years. Some vary by the type of debt, while others have the same statute of limitations no matter what type of debt is concerned. The ‘M’ states of Maine, Massachusetts, Michigan and Minnesota have a 6 year statute of limitations for all types of debt.

Usually written contracts and promissory notes have the longest statute of limitations, with some states, such as Ohio, Kentucky and Rhode Island allowing such debt to be legally collectible for a full 15 years after it has gone into default. Oral agreements have the shortest statute of limitations before a debt is legally uncollectible. In California, if you can avoid repaying the debt for only 2 years after it’s gone into default, the statute of limitations on the debt will expire, and you’ll be free, if you can live with yourself.

So, if you get one of those collection calls you though you’d escaped from, especially if it’s about 6:30pm, just as you’re about to enjoy another spoonful of peas, think about just how old that debt is. You can mention the words “statute of limitations” to the person no the other end of the phone. Maybe that’ll keep them from calling back, but the can be pretty persistent and intimidating. Maybe you could try a different angle, tell them the statute of limitations on the debt has expired, but the one on what you’ll do to them if they call back again will never expire, and you never want to hear from them again. That may be the only thing that will work.