Do I Have to Pay a Sold Debt?

Debt collectors make your life miserable if they bombard you with letters and phone calls demanding payments. Some collection agencies use threats and abusive language, even though the Privacy Rights Clearinghouse website explains that these tactics violate the Fair Debt Collection Practices Act. Many collectors are not directly involved with the original creditor. Debts get sold, and the buyers can pursue payment within certain legal limitations.

Definition

A sold debt is a bill that was charged off by the original lender and sold to a collection agency at a discount. MSN Money writer Liz Pulliam Weston says that charge-offs usually happen if you stop paying a credit card or other unsecured account for about six months. The lender gets tax benefits from writing off the unpaid amount, then makes additional money selling it to a professional collector.

Liability

You are obligated to pay a sold debt as long as it is within the statute of limitations in your state. The typical period runs between three and 15 years. You can refuse to pay, but the collection agency can hound you for the money or use legal means like lawsuits, court judgments and wage garnishments if your state allows those actions. A debt collector can also notify the credit bureaus about the collection account, which gets in the way when you apply for new accounts. The Federal Trade Commission (FTC) advises that the collector cannot add interest charges or penalty fees to the sold debt unless the original contract or your state's laws allow it to do so.

Payment

Collection agencies that buy debts often settle for less than you originally owed, Pulliam Weston says. These firms sometimes pay as little as a few pennies on the dollar for the debts, so they make a profit even if they give you a big break. Your credit rating is not automatically restored by settling the account. A paid collection is still considered a negative item, and it stays on your Experian, TransUnion and Equifax reports for seven years unless you negotiate its removal. Make erasure of the account a condition of your settlement, and get a written agreement before paying.

Warning

"Zombie" debt collectors buy bills that are past the statute of limitations, hoping to collect some money even though they have no legal recourse against you. Bankrate columnist Don Taylor explains that you can halt phone calls by sending a certified letter to the collector demanding that it stop calling you. The agency is bound by this demand. Very old debts may be bought and sold many times, so you may hear from a new collection agency after you send your letter to the collector who is currently harassing you. Never make a payment on an out-of-statute debt, "The New York Times" website writer Andrew Martin warns. Sending money restarts the time period and renews the collector's right to sue you.

References

• "The New York Times" Business Day: Old Debts That Won't Die
• Privacy Rights Clearinghouse: Debt Collection Practices, When Hardball Tactics Go Too Far
• Federal Trade Commission: Debt Collection FAQs, A Guide for Consumers
• MSN Money: Credit Card Debt, How to Cut a Deal
• Bankrate.com: Good Letter Can Silence Debt Collector
• Consumer Fraud Reporting: State Statutes of Limitations for Debt Collection

Resources

• Consumer Fraud Reporting:
• Expert Law: What if You Don't Want the Collection Agency to Contact You?