Q: If my debt has passed the statute of limitations in my state, how do I get the debt off my credit report?
Ever since the recession caught consumers at all income levels by surprise, state officials have taken stronger stances to ensure their residents don't get crushed under the burden of old debt. However, just because a lender can no longer pursue a "time-barred debt," that doesn't mean it can't haunt your credit report.
Time limits on debt vary greatly from state to state, ranging from 2 to 10 years. The exact length of time depends on the type of account, the kind of contract you signed, and whether any part of your debt was secured by your personal property. According to the Federal Trade Commission, a negative entry on your credit report can stay there for seven years from the date of the last activity. If your bad debt was discharged in bankruptcy, the case notation can remain there for 10 years.
Regrettably, a subculture of sketchy attorneys and rogue collection agencies has found a way to extort consumers with past delinquencies. "Debt buyers" can purchase the right to collect defaulted debt for pennies on the dollar. They're hoping you'll want to pay them to go away, rather than risk losing out on a job or paying twice as much for a mortgage due to a dip in your credit score.
"Zombie debt" shows up when a debt buyer posts a line item to your credit report as if the debt were new. That makes it look like you're falling behind on your bills right now, even if your debt's nearly seven years old. If you pay even a tiny part of that outstanding balance, you'll reset the clock on your statute of limitations. The debt buyer can then sue you or collect judgements against your property, even after the original balance reaches your state's deadline.
The FTC, CFPB and a host of state agencies have stepped up enforcement actions against debt collectors and attorneys who violate laws by threatening consumers or deliberately posting false information to credit reports. Yet, you'll still need to be vigilant. Check your credit reports from all three bureaus at least once every year and dispute any line item from a collections agency that doesn't look familiar. Likewise, if an item appears outdated, dispute it. A bank or collector must provide proof of both a contract and account activity for that item to remain on your record.