In The Know: Common Old Debt FAQs
It is typical for us to receive at least a few calls a week about old debts. In an effort to address some of the most common questions, we thought we’d dedicate this week’s blog to answering a few of the ones related to old debts – questions we get, as mentioned, on a regular basis.
Common Old Debt FAQs
- Does debt expire? No. If you don’t pay a debt, you will always owe it. Debt never just disappears from the record books.
- Is there a statute of limitations on taking action to collect a debt? Yes. This is where most of the confusion stems from. While old debts never expire, there is a statute of limitations for creditors on commencing action to collect a debt. In Ontario, if a creditor does not register a complaint with the court against you within that 2 year timeline, they lose the ability to enforce collections (wage garnishments, frozen bank accounts, property liens, etc.).
- What if a creditor registers a complaint before the 2 year timeline is up? Once the action is commenced, there is no statute of limitations and that creditor will be able to enforce collections on the debt, plus court fees, forever.
- Do creditors sell debts to collection agencies? Yes, while many creditors will engage collection agencies to collect debts on their behalf, if they do not take action to register a complaint with the courts within the 2 years of your default, they will often decide to sell that debt to an agency at a reduced rate in an effort to recoup at least a portion of their money. Once this happens, they wipe their hands of the debt.
- What happens if a collection agency buys an old debt? If a collection agency buys an old debt, their goal is to collect from you. This is often done through continuous contact attempts and threats to scare you. Many will agree to minimal repayment terms, stating after a payment is made they will stop calling. However, it is important to note that, once you make a payment, even if it is only $1, you reactivate the debt! If the 2 years has passed, and you agree to make a payment, this signifies a re-acknowledgement of the debt, removes the limitations on it, and gives them the ability to enforce collections.
- What should I do if a collection agency starts calling me about an old debt? Tell them that you know that the statute of limitations has passed and you know your rights. Advise them to stop calling you or you will call the police for harassment, which you have every right to do under the Consumer Protection Act.
- How will not paying an old debt impact my credit? While the statute of limitations means a debt more than 2 years old can’t be enforced as far as collections, meaning you don’t technically have to pay it, it does stay on your credit for 7 years. This can do serious damage to your credit report, making it difficult (if not impossible) to obtain new credit of any kind.
If you’re concerned about an old debt that’s currently haunting you, or new debt that you just can’t seem to get a handle on, call DebtCare today to find out about the various options available.
We’re here to help: 1 (888) 890-0888.