Can a collection agency report an old debt as new?

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In 2021, the Urban Institute estimated that there were 64 million Americans with accounts in collections. If you’re one of the millions of Americans with an account in collections, you may be wondering: can a collection agency report an old debt as new?

This is a common question due to how lenders and collection agencies sell your debt to different collectors. Any debt over a year or two old is typically considered “old debt.” Understanding how these collection accounts work can help you protect your credit score and get back on the right track financially.

Not only will we discuss how resetting debt works, but we’ll also cover how you can manage your debt, pay off collections, and know your rights when it comes to collection agencies.

Can a collection agency reset old debt?

An account in collections can have different dates attached to it, but the collection agency cannot report the old debt as new. This should provide some relief if you’re concerned about a collection account staying as a derogatory mark longer than it should on your credit report.

Creditors and collection agencies will sell your old debt to other collection agencies if they can’t collect. If this happens, multiple dates for a single collection can show on your account, but that single collection will maintain the same delinquency date attached to the original charge-off.

When lenders or anyone reviewing your credit report sees the collection, they may see multiple dates, but they’ll also see the original date. This won’t affect the seven years it takes for a collection to fall off your credit report.

How does old debt work?

Old debt has a statute of limitations, which gives collectors a specific window of time to take action against you. For example, to collect on an old debt, some collectors will sue you, but they can only do so if it falls within the statute of limitations. The statute of limitations can vary, so the Consumer Financial Protection Bureau recommends consulting an attorney to find out the laws in your state.

Just know that although the collector cannot sue outside of the statute of limitations, they can still attempt to collect old debt by calling and sending letters.

What actions can reset old debt?

It’s possible to reset the statute of limitations on your old debt, which gives collection agencies the opportunity to take action against you. The following actions can reset the statute of limitations on old debt:

• Making a partial or full payment on the old debt
• Acknowledging and agreeing to pay on the old debt
• Making a charge on a credit card that has the old debt

Can a bankruptcy reset old debt?

If the bankruptcy court discovers fraudulent debt, it can reset the clock as well. Chapter 7 bankruptcy eliminates old debts, and it prevents collection agencies and creditors from collecting that debt in the future. During the bankruptcy process, the bankruptcy trustee communicates with creditors, and they may claim that your debt is fraudulent.

Fraudulent debt occurs when an individual provides false information to a creditor in order to receive a loan or line of credit.

Are time-barred debts on your credit report?

Time-barred debts are the debts that have gone past the statute of limitations, and they can show up on your credit report. Collection accounts stay on your credit report for seven years, so if the statute of limitations is less than seven years, the collection can still show up on the report.

Four steps to take if you’re contacted about an old debt

Although old debts retain the same delinquency date and won’t show up as new, there may be a concern that you’ll reset the clock on the statute of limitations. This is where it’s helpful to know your rights if you hope to avoid resetting the date on an old debt.

1. Ask for a written notice

The Fair Debt Collection Practices Act from the Federal Trade Commission (FTC) requires collectors to send a written notice of your debt among other rules that protect you. Asking for a written notice can help you avoid saying something on the phone that may reset the debt.

2. Validate the debt

It’s possible that a debt was reported in error, which means you may be able to remove delinquency from your credit report. First, you’ll need to validate whether or not the debt is accurate. You have 30 days from the time you were contacted by the agency to request the validation of the debt—simply tell the collection agency that you’re going to dispute the collection and would like a validation letter.

3. Check if the debt is within the statute of limitations

While you’re waiting to validate the debt, it’s a good idea to contact an attorney to further discuss your rights and see if the debt is within the statute of limitations. Some attorneys even provide a free consultation.

4. Take action

It’s now time to decide which action you’d like to take: pay, settle or dispute. If the debt is legitimate, you can pay it in full or see if you can set up a payment arrangement. You can also try to negotiate the debt—many collectors will settle the account for less than what you owe. If you pay the debt off, be sure to request a pay for delete letter, as this is how you can potentially remove collections from your credit report.

You also have the right to request that the collection agency no longer contact you in the future, but this does not stop them from taking action if the debt is within the statute of limitations.

FAQ

The topic of old debt and collections can get complicated, so we’ve answered some frequently asked questions about old debt below.

How long can a debt collector pursue an old debt?

Debt collectors can continue to pursue old debts beyond the statute of limitations in your state, but they can’t take action against you beyond that point. The collection can stay on your credit report for seven years from the date of delinquency.

Does disputing a debt restart the clock?

Disputing an old debt only restarts the clock on the statute of limitations if you admit that the debt is yours. By requesting the collection agency to validate the debt, it is not an admission of owning the debt.

Will time-barred debt affect my credit score?

Yes, it can. If the statute of limitations in your state is less than seven years, the debt will typically continue to show on your credit report and hurt your overall credit.

How to dispute collection accounts on your credit report

If there are any collections accounts on your credit reports that are unfair, inaccurate, or unsubstantiated. If you run into this issue, you may want to work with credit consultants who will work with you to dispute these collection accounts.

Lexington Law Firm has been representing our clients since 2004, so we have years of experience helping people rebuild their credit. Not only can we help you dispute collection accounts, but we can help you find any other errors that may be on your report, negatively affecting your credit. To learn more about how we can help, check out our assortment of services, or contact us today.

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