Can I be sued for a car loan I co-signed 22 years ago?

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Dear Penny,

Yesterday I received a letter from a financial company here in Iowa, where I lived for 14 years. He said I owe money that hasn’t been paid on a car that I co-signed in 1999 for a roommate when I lived in Florida. She didn’t have enough credit, but I found out she died in 2000.

I think his son kept the car (no will). He had to make payments, or he traded in the car. I don’t know what he did. I lived in Iowa for 14 years and long since lost touch with him.

The letter said I had to pay for the car she bought in 1999. Can they charge me after 22 years? Please tell me if I am responsible. I am retired now. I live on my Social Security. I am 69 years old and I can barely survive.

-Q.

Robin Hartil [ The Penny Hoarder ]

Dear Q,

I wouldn’t pay a penny of this debt. This is clearly a case of zombie debt, meaning debt that has already been paid or is so old that it is no longer recoverable.

But that doesn’t stop sketchy companies from trying. Agencies buy tons of old accounts for pennies on the dollar, or sometimes even less. If they scare only a small fraction of people into paying, they can make a profit.

Of course, you should pay the debts you know you owe when you can afford them. But you really don’t know if that loan has become delinquent. Even if it was, your roommate’s lender had plenty of time to sue you. He chose not to. Meeting your basic needs is more important than paying off a loan you co-signed 22 years ago.

Each state has what is called a statute of limitations for bringing debtors to justice. This window can range from three to six years, depending on the state. In Florida, it’s five years for written contracts, including auto loans.

After the statute of limitations has passed, a debt collector can still try to make you pay. But they can’t sue you for it. Once seven years have passed since the account became delinquent, it should also no longer appear on your credit reports.

Technically, you still owe an old debt. But there’s really no consequence if you don’t pay it back. They can’t get a judgment from the court. They are not allowed to add negative information to your credit file, although some debt collectors use this illegal tactic. They cannot seize your wages or your bank accounts.

And for the record, your Social Security benefits can’t be withheld unless you owe the government taxes or federal student loans, or have unpaid alimony or child support. A debt collector cannot seize your Social Security for an overdue consumer debt, such as a car loan or credit card.

The real risk comes if you make even a small payment. Depending on your state’s laws, you can restart the collection clock. The same applies if you acknowledge that you owe this debt.

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Normally, I wouldn’t advise ignoring any financial matters. But I think that might be your best approach here. This company probably buys a huge number of accounts, knowing that the vast majority of people they contact by email will never respond. I’m afraid contacting them will prompt them to take more aggressive action.

This company knows they can’t legally sue you. In the unlikely event that he tries to do so anyway, the case will automatically be thrown out since the statute of limitations has expired.

But get a copy of your free credit reports from each of the three bureaus (TransUnion, Equifax, and Experian) to verify that account isn’t listed. Unpaid debts should not appear on your credit reports once seven years have passed since the original default. If the account is still listed, use the Consumer Financial Protection Bureau’s sample dispute letter to have the debt removed.

If the agency continues to contact you, you may want to request a debt validation letter requesting information about the money they claim you owe. It is essential to avoid acknowledging that you owe anything. Under no circumstances should you provide personal information, such as your social security number or banking information.

If they respond, you can send a letter saying the statute of limitations has passed and demand that they stop contacting you. Report the company to the Federal Trade Commission or your state attorney general if they continue to do so.

I would only contact this company if absolutely necessary. You are no longer responsible for this debt. Don’t let any debt collector tell you otherwise.

• • •

Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.

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