How Can You Avoid "Re-Aging" Of Medical Debt?
If you've suffered an injury or illness that has left you facing a growing stack of medical bills, you may have begun receiving calls and letters from collection agencies attempting to collect on this debt. However, each debt has an expiration date -- and acknowledging these debts or attempting to make payments or offering settlement could restart the clock, allowing collection agencies to continue to make contact for months or even years. Read on to learn more about when debts age off your credit report, as well as what you can do to avoid the "re-aging" of old debts.
What happens when debt ages off?
When you incur a debt -- with a hospital's billing department, credit card company, or other credit-extending entity -- and fail to pay it pursuant to the terms prescribed, you empower the creditor to collect this debt from you through enforcement of a court judgment. Once a court judgment against you has been obtained, the creditor may freeze your bank accounts, garnish your wages, or even intercept your tax refund check.
However, many creditors don't have the desire or the manpower to go through a potentially lengthy legal process to secure a judgment, then another lengthy process to seek payment. Instead, they will sell the rights to collect a debt to a third-party debt buyer, often for as little as pennies on the dollar of the original debt. The remaining debt is then "charged off" by the creditor and taken as a loss on the business's taxes.
The third-party debt buyer then has the legal power to collect this debt from you, but must first seek a judgment and then collect on the judgment. Rather than do this, many debt collectors instead send letters or make frequent phone calls to attempt to settle the debt or set up a payment plan. Because this debt buyer has purchased the debt for very little, accepting a settlement of even half the original amount owed can result in quite a profit.
These debts don't last forever -- and if a debt collector has let a certain period of time elapse without attempting to collect on the debt, this debt may "age off" your credit report within 7 to 10 years of the original default date, extinguishing your responsibility to pay this debt. This means that failing to respond to debt collection efforts or acknowledging the debt can eventually work in your favor by allowing the debt to fade away unpaid.
When can a debt be "re-aged"?
The statute of limitations governing the collection of old debts is set by each state -- so a debt that is aged off in one state may still be collectible in another. However, if at any point before the debt has been aged off, you contact the collection agency, acknowledge the debt, or otherwise make an attempt to pay, this may revitalize or "re-age" the debt, resetting the statute of limitations. For example, if the statute of limitations in your state allows the aging off of debts 7 years old or older, but you contact the collection agency to verify the amount of debt owed after failing to pay a medical bill for 6 years, you may not be able to have this debt aged off until another 7 years has passed.
For this reason, if you don't have the funds to pay a debt and are nearing the expiration of the statute of limitations, it's often best to ignore attempts at contact from creditors and avoid responding in any manner that could potentially re-age your debt. However, you should always be cognizant of any legal action, and if you are sued to recover this debt, should respond in court. Once you've reached the statute of limitations, you can request that these debts be removed from your credit report. If you have more questions about this process, then contact an attorney in your area.