Money Dusting Off Old Debt Liz Weston | MY TWO CENTS ▪ Dear Liz: A collection agency just called about a credit card debt I failed to pay—more than 20 years ago! The agency is offering a repayment plan. Should I take it? You should always pay your debts, right? But in the case of a long-unpaid debt, doing the right thing ethically can cause problems legally. That's because every state has statutes of limitations on debt, typically from 3 to 10 years. These statutes limit how long a creditor or collection agency can sue to reclaim the money. Collectors can buy “out of statute” debts for pennies on the dollar from credit card issuers, cell phone firms, and other companies, so anything they squeeze out of a borrower is almost pure profit. And they often won't tell you you're not legally obligated to pay. In many states, making a small payment on an old debt will restart the statute of limitations and allow a creditor to sue. That can lead to trashed credit and wage garnishment. In a new twist, collection agencies partner with banks to offer credit cards to people with troubled credit histories. If you snap up the card, you might not realize you're also agreeing to pay the old debt, which has been added to the card's balance. In 2010 Monterey County Bank paid a $3 million settlement without admitting or denying wrongdoing after the FDIC accused it of helping a debt collector revive expired debts with deceptive card offers. With the economy improving and borrowers looking for fresh starts, these collection efforts are on the rise. But don't take the bait: Tell the collection agency—in writing—to stop contacting you. Owe? No! > What if it's not your debt? Collectors often contact the wrong person, since old debts tend to be poorly documented. That won't stop them from suing you, though. So fight back. Send a letter by certified mail, return receipt requested, telling the collection agency that you don't owe the debt and to stop contacting you. If the collector files a lawsuit, don't ignore it. You'll get the case dismissed if you can prove it's not your debt. The National Association of Consumer Advocates (at naca.net) can help you find an attorney. BE A BETTER Monitor your credit reports to ensure collectors don't post old debts there. File complaints about debt collectors by calling 877-382-4357 or visiting the FTC website (ftc.gov), and contact your state attorney general's office. Search for your state's statute of limitations on debt at bankrate.com.