Old Debt Collection Laws: How They Affect Businesses and Consumers

Old debt collection laws can greatly affect both a business's ability to legally get paid on a past due account. It also has some very important ramifications for consumers as well.

These laws are governed by the statutes of limitations, and they vary from state to state. Read about the state limits that apply to your state.

Once a debt has run past its statute of limitation, a debt collector can no longer collect on that debt. It doesn't mean, however, that they can't legally sue to collect. But if the expiration has passed, they're not likely to be successful.

How Businesses Are Affected

This is important for a business owner attempting to recover his/her lost profits in delinquencies. Its definitely in your best interest to be pro-active in trying to recover on these past due accounts: the earlier the better.

In house collection efforts, such as writing letters and making phone calls are covered in detail elsewhere on this website. We've even included a number of sample collection letters that you can use.

The point is that its very important for business owners to recognize when a late paying customer is becoming a problem account. At this point, it may be time to pursue other avenues, including third party collection agencies.

Time is at a premium, and should be seen as just as important as asset as your accounts receivable. Meaning that the longer the debt goes unresolved, the less likely you're to recover on it.

Here's where old debt collection gets tricky though. For the business owner, you will effectively reach the point of no return. Or, you'll likely end up writing off that bad account(s). And after a period of time has elapsed, the laws actually protect the consumer.

After the statute of limitations has passed, even a collection agency, short of threatening a lawsuit, can't successfully pursue the debt. If the customer can prove the age of the debt has expired, the suit isn't likely to prevail either.

Consumers Pay Attention!

Here's the double tricky part......and this is where consumers need to pay particular attention. Even once a debt has expired its statute of limitation, some collection agencies will take advantage of a debtor's lack of knowledge of the laws.

If a debtor, threatened with legal action, is frightened into making payment arrangements, or admitting to owing the debt, can end up reinstituing the expired debt all over again, effectively rolling the clock back all over again.

Consumers, unaware of how to properly raise a defense, might end up losing a judgment in favor of the collection agency, and thereby effectively raising that old debt collection from the grave.

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