Having large amounts of outstanding debt is an understandable reason for choosing to file for bankruptcy. It might seem as though there are few viable options for people trying to eliminate their debts, although Chapter 7 bankruptcy might be one of them. An experienced attorney can help guide people who find themselves in this kind of situation to determine if bankruptcy — either Chapter 7 or Chapter 13 — could prove to be useful to them.
It might not be necessary, however. An old debt that is a relatively low amount might be outside the statute of limitations to be collected. A collection agency might not be able to work to attempt to collect an old debt for an unlimited amount of time.
Another thing to take into consideration is one’s credit report. A collection account can be reported for about seven and a half years from the date when the consumer first became delinquent. That means an old debt might fall off of someone’s credit report on its own. However, if a collection agency sells the rights to collect that debt to a different agency, the clock could be reset.
Consumers do have rights under the Fair Debt Collection Practices Act. If creditors are continuing to contact a consumer about a debt after the consumer has asked them not to contact them further, the collection agency could be held liable.
Debt collectors are also not allowed to misrepresent the tactics they can actually employ. They generally cannot, for example, threaten to sue a consumer past the statute of limitations for a given debt.
Source: Fox Business, “What Happens If I Never Pay an Old Debt?” June 2, 2014