Debt Re-aging

Debt re-aging summary: 

• Debt re-aging happens when a debtor acknowledges a debt by making a payment, attempting to negotiate or admitting to owing a debt. Acknowledging a debt restarts the clock on possible legal action.

• Debt re-aging benefits debt collectors because it extends their legal right to collect a debt.

• Debt collectors sometimes fraudulently report a debt as new, an illegal form of debt re-aging.

Debt Re-Aging Definition and Meaning

Debt re-aging resets the clock on the statute of limitations. It can happen when a borrower acknowledges a debt by making or promising to make a payment or by admitting to owing the debt.  

Debt collectors can take advantage of debt re-aging to sue you for old debts. Understanding how debt re-aging works can protect you from collection attempts or legal action on debts.

An old debt can also reappear on your credit report when it’s purchased by a collection agency or debt buyer. Whether intentional or not, this type of debt re-aging violates the Fair Credit Reporting Act (FCRA). Debt in collections can only stay on your credit report for seven years plus 180 days after the date of first delinquency.

Key Components of Debt Re-Aging

Debt collectors and the statute of limitations are key to understanding debt re-aging.

• Debt collectors. Collect on the debt you owe. 

• Statute of limitations. Typically expires in three to six years, after which a debt is considered time-barred. Collectors can’t bring legal action for time-barred debts. 

• Fair Credit Reporting Act. The law prohibits debt collectors from re-aging or reporting old debts as new.

States usually set the statute of limitations on consumer debt at three to six years, but some states set it at 10 years. Once the statute of limitations expires, collectors can’t sue a borrower for debt. 

Collectors can sometimes contact you, but they can’t take you to court. However, there’s an exception. If the borrower acknowledges the debt, the statute of limitations resets.

The resetting of the statute of limitations is called debt re-aging. 

Types of Debt Re-Aging

Debt re-aging can be done legally or illegally, depending on debt collector integrity.

Legal debt re-aging occurs when you acknowledge a debt to a debt collector. Your debt is re-aged, and the debt collector can legally take you to court.

Illegal debt re-aging occurs when a debt collector falsely claims your debt is younger than it is. It happens. Debt collectors ignore the statute of limitations in hopes you won’t challenge them. The collector wins the case when you don’t show up in court to defend yourself.

Tip: Show up to court to prevent debt collectors from winning by default. Debt collectors who sue successfully can levy your bank account or garnish your wages.

Debt Re-Aging: a Comprehensive Breakdown

Debt re-aging usually refers to resetting the timing for the statute of limitations that prevents collectors from suing you for old debts.

How to avoid debt re-aging

Avoid partial payments or acknowledging debt to prevent re-aging debt. 

Partial payments reset the clock on the statute of limitations. If you pay $100 toward an old $1,000 debt, debt collectors can take you to court and sue you for the rest.

Acknowledging debt  in writing or sometimes even verbally can reset the clock on the statute of limitations. Avoid admitting to owing anything over the phone or by email. Only contact debt collectors in writing and without admitting to the debt until you know what you want to do about it. This prevents them from taking you to court and claiming you “verbally acknowledged” a debt over the phone.

Moving states

Moving to a new state might affect when your debt becomes time-barred. Determining which state's statutes apply may depend on several factors, including how your contract is written, and can be complicated. Consider consulting an attorney if this situation applies to you.

Time-barred debt

Your debt can be re-aged even after the statute of limitations has passed. Acknowledging a time-barred debt to a credit collector can reset the clock.

How long does debt stick around?

Debt sticks around until you get rid of it. It doesn’t vanish by itself. Many states let debt collectors contact you even after the statute of limitations has passed. Collectors can't pursue you for it in court, but technically, you still owe it. You can get rid of debt by paying it off fully, settling it or declaring bankruptcy. 

Unpaid debt only remains on your credit report for seven years.

When is debt re-aging a good thing?

Debt re-aging has another meaning. A nonprofit credit counseling agency may negotiate with your creditor to re-age a past-due account as part of a debt management plan (DMP). At that point, your creditor treats your account as though it were current and doesn't require you to make up missed payments. Generally, this makes paying your debt more manageable. You might also be able to get a creditor to re-age a past-due account by sending a goodwill letter. If you had a satisfactory repayment history with them and there's a good reason you fell behind, you might be granted this help. 

No more late fees: Your creditor may stop charging you late fees, reducing what you owe.

Boosted credit score: Once your account is current, you can start to rebuild your score with on-time payments. Your late payments are still on your credit report, but you can still work toward improving your score.