What Is Time-Barred Debt?

How Does Time-Barred Debt Work?

If a debt is time-barred, debt collectors can no longer sue you for payment. However, the debt doesn't disappear in most cases, and collectors may still contact you seeking payment—they just can't take legal action to collect it.

The statute of limitations on consumer debt varies by state and depends on whether the contract is written or oral, the type of debt, and state laws cited in your credit agreement. In most states, the statute of limitations ranges from three to six years. The starting point for calculating this timeline also varies based on your state, debt type and applicable state law.

Reminder: Some debts have no statute of limitations, including federal student loans, certain income taxes owed and child support (in some states).

What Happens to Time-Barred Debt?

When debt becomes time-barred, it usually doesn't automatically disappear. Only three states eliminate debt when the statute of limitations expires: Mississippi, North Carolina and Wisconsin.

Consumer Financial Protection Bureau (CFPB) rules don't prohibit collectors from contacting you about time-barred debt. However, the Fair Debt Collection Practices Act (FDCPA) restricts how creditors can collect and prohibits false, deceptive, unfair, unconscionable or misleading collection tactics.

Learn more: What Types of Debt Can Go to Collections?

How Time-Barred Debt Affects Your Credit

Time-barred debt can still damage your credit score and financial opportunities, even though collectors can't sue you for it.

If your debt becomes severely delinquent, it may be sold to a collection agency. Collection accounts remain on your credit report for seven years from the date the debt first became delinquent and can significantly harm your credit score.

Even after debt passes the statute of limitations and becomes time-barred, it remains visible on your credit report. This negative mark can lower your credit score and signal to lenders that you may struggle to repay debts.

The consequences of unpaid debt extend beyond your credit score. Time-barred debt on your credit report can still make it harder to get a mortgage, buy a car, secure employment or qualify for a credit card or personal loan. If you do qualify for credit, you'll likely face significantly higher interest rates than borrowers without collection accounts.

Be aware: Under Regulation F, debt collectors are prohibited from threatening to sue you on time-barred debt. If a collector makes this threat, they're violating federal law. You have the right to dispute the collection and report the violation to the Consumer Financial Protection Bureau (CFPB).

Learn more: What Affects Your Credit Scores?

Should You Pay Off Time-Barred Debt?

If your debt is time-barred, you don't legally need to make payments. If you do, you risk the debt no longer being time-barred, allowing collectors to sue for payment again. In some states, the same thing can happen even if you simply acknowledge the debt in writing.

You have several options if collectors come after you for a time-barred debt:

1. Choose not to make any payments. You can't be sued after the statute of limitations expires. However, debt collectors can still contact you, and your unpaid debt will remain on your credit report for seven years from the original delinquency date. Keep in mind that delaying payment means accumulating more interest and late fees. Many newer credit scoring models exclude paid collection accounts when calculating your score, so leaving debt unpaid can hurt your credit longer.
2. Make a partial payment. It's possible that a debt collector will accept an amount lower than what you owe to close your account. However, if you choose this route, make sure your payments are documented in writing, releasing you from future obligations. Settling your debts for less than you owe, however, will have a negative impact on your credit scores.
3. Pay off your unpaid debt in full. You could decide to pay the debt in full, which may help improve your credit scores right away. Additionally, many lenders view a paid-off collection account more favorably than an unpaid one.

Learn more: Can Paying Off Collections Raise Your Credit Score?

Frequently Asked Questions

The Bottom Line

You are protected from being sued by debt collectors for time-barred debt by the statute of limitations. Even so, that doesn't mean you no longer owe on your debt, and debt collectors can still contact you to collect on the debt. Just as important (maybe more) is the fact that the debt will remain on your credit report for seven years after your first missed payment.

To keep track of any debt that may be holding you down or in collections, get your free credit report from Experian.