The good news is that for most debts, there is a statute of limitations which prevents lenders from hounding you for something that happened 20 years ago! The only debts that have no statue of limitations are income tax debt, federal student loans and child support.

The statue of limitations is the amount of time that a creditor can collect on a account and use the court to force you to pay.

Every state has different guidelines as to the time frame, which begins on the accounts date of last activity. These time frames range from three to fifteen years, so it is important to know what applies to the state you are currently living in. For a state by state guide, visit Bankrate.com

Many original creditors will try to convince you that the statute of limitations does not apply to them! This isn't true! The statue of limitations applies to original creditors and collection agencies alike.

Many people get confused by the credit reporting time limit. Just because an account can stay on your credit report for 7 years, doesn't mean that the creditor can legally collect for 7 years. It all depends on your states laws! The credit reporting time is dictated by the Fair Credit Reporting Act and is completely independent of the statute of limitations!

If you have old debt, knowing your states statutes is critical. Many collectors, especially independent collection agencies, will attempt to collect from you even on an account that they know is beyond the statue of limitations. They are hoping that you are ignorant of the laws and that they can intimidate you into paying.

Some companies will go so far as to sue you! This is where it is especially important that you know the law! Nothing can protect you from being sued, but if an account is past the statute of limitations, you can use this as a defense in court and prevent the collector from winning.

When dealing with old accounts, it is best to proceed very carefully. Limit any communication to mail. If you speak directly to the collectors, you can be at risk of restarting the clock on the statute of limitations.

Just remember, any action you take on the account will stop the time frame. This includes even making the statement that you promise to pay. Making a charge on an account, making a payment or entering into a payment agreement will also restart the clock. Be careful!