Here’s the thing: even a small, partial payment on an old debt can revive the statute of limitations. That can allow the creditor to sue you and get a wage garnishment order so it can take money right out of your paycheck.

If it were the original creditor suing you, you might resign yourself to the situation. But often the company filing the lawsuit is not the original creditor. Many times, the company that originally loaned you the money has long since written off the account, gotten a tax break for bad debt and sold the account to a collection agency. So the entity suing you may be  a collection agency which purchased your debt for 2 or 3 cents on the dollar–or even less.

The Wall Street Journal has done some good stories lately on the debt-buying industry, and has one today about the FTC’s settlement with Asset Acceptance, one of the largest debt buyers. The FTC alleges people were coerced into paying debts beyond the statutes of limitations. In some cases, the FTC contended, Asset Acceptance reported details of the out-of-statute debts to the credit bureaus in violation of federal credit reporting laws.

Most of us feel a moral obligation to pay what we owe. If bad decisions or bad circumstances have left you with unpaid bills, though, you could be stepping on a land mine if you make a partial payment on old debts. Before you pay, you should understand whether the debts are within the statute of limitations. If they’re not, and you still want to pay, consider negotiating a lump-sum settlement that includes the collector’s promise not to resell any portion of the debt. This is tricky business, though, and you should educate yourself thoroughly before you make the attempt. DebtCollectionAnswers.com, a site run by credit expert Gerri Detweiler, is a good place to start.

But a Facebook fan pointed out that not all debt collection calls are based on a legitimate debt:

After my father died, my mother was contacted by someone falsely claiming he owed a medical bill, offering to process the payment over the phone. She knew it was false [because] she handled the bills, so she told them not to call again.

Survivors also should beware of calls from purported charities, claiming that the deceased promised them a donation of some kind.

When it comes to claims against an estate, you’ll want to see proof that the deceased owed the debt or made any kind of financial promise. Don’t take a caller’s word for it.

Answer: When a lender charges off a bad debt, the debt itself doesn’t disappear. The lender is simply declaring that it doesn’t think it will be able to collect. The debt can be sold to collection agencies, which can post the collection account on your credit reports.

The charge-off is what typically does the most damage to your credit scores, although the collection accounts increase the toll.

There are limits to how long creditors can pursue you in court over debts. The limits vary according to each state’s statute of limitations. There is also a limit on how long bad debts can show up on your credit reports (typically seven years and 180 days from when the account first went delinquent).

But debts only disappear when you pay them or have them legally erased in U.S. Bankruptcy Court.

One of the things you should learn from this experience is not to trust a lender to tell you how much you can afford to borrow. The other is that you should always arrange financing in advance before you venture onto a car dealership lot. If the dealership can beat the deal you get from your bank or credit union, great. Otherwise, you’ve got financing you know you can afford.

Answer: The clock on reporting most negative marks begins when the account first goes delinquent and isn’t reset when a creditor or collection agency updates or sells the debt. If the collection agency continues to report the debt after seven years and 180 days passes, you should be able to dispute the entry with the credit bureaus and get it removed from your credit reports.

You also may need to be concerned about your state’s statute of limitations for this debt. This statute affects how long you can be sued over a debt, which can vary from three to 15 years. In some states, the statute can be extended if you make a payment on the debt or even acknowledge it as your own.

If you’re at risk of being sued, you may want an attorney’s advice about how to proceed and whether you should try to settle this account. You can get a referral from the National Assn. of Consumer Advocates at http://www.naca.net. Even if you aren’t at risk of a lawsuit, it could pay to get this debt resolved. As you’ve learned, mortgage lenders typically aren’t willing to lend money to people with open collection accounts on their reports.

Answer: You’re not quite done yet. If you’re contacted by a debt collection agency, you need to send a copy of the proof you paid the bill to the agency, along with a letter saying that you don’t owe the debt and that reporting the debt to the credit bureaus would be a violation of fair credit reporting and debt collecting laws.

If the debt collector insists on reporting the debt to the credit bureaus, it could affect your scores. Continue monitoring your credit reports and be ready to dispute the bogus collection account if it appears. You may be able to sue the debt collector if it persists in reporting a false debt. You can find more information at DebtCollectionAnswers.com.

Answer: Your brother’s bills are the responsibility of his estate, not your parents. His creditors would have to be paid if he had any assets, but in this case they’re out of luck.

That doesn’t mean they won’t keep trying, however. Your parents could opt to ignore the calls, letters and guilt trips the collectors try to inflict. Or your parents could talk to a probate attorney who is familiar with the laws of the state where your brother died. The state probably has some kind of simplified probate that would allow your parents to legally resolve these bills and put an end to collection activities.

Answer: So you’re surprised that a “very aggressive and threatening” collector suddenly changed the rules on you? It’s time to wise up and realize you’re not dealing with an ethical company.

You need to make an appointment immediately with an attorney who is familiar with the credit and collection laws of your state. You can find a referral through the National Assn. of Consumer Bankruptcy Attorneys at http://www.nacba.org. Many of these attorneys offer free or discounted initial sessions.

All too often, rogue collection agents violate federal and state fair debt collection practices by threatening to sue when they have no intention of doing so or when they are legally barred from filing lawsuits. Your state’s statute of limitations limits how long a creditor can sue over a debt. In some states, people who lose homes to foreclosure also are protected against lawsuits over any remaining mortgage debt.

But your payments may well have extended the statute of limitations under which the collector would be allowed to sue you. That’s why you need an attorney to advise you. You also might want to consult DebtCollectionAnswers.com, a site run by debt expert and consumer advocate Gerri Detweiler, for more help in dealing with collectors.

You were smart not to send the financial information they demanded, because none of that is necessary for a settlement discussion and because the data could easily be used against you. If they’re unethical enough, they could use the bank account information to raid your accounts.

Answer: The collection agencies are violating federal credit reporting laws. Negative information such as charged-off accounts and collections are supposed to be removed from your credit reports seven years and 180 days after the account first goes delinquent (typically when you miss your first payment). Collection agencies are not allowed to “reset the clock” when an account is sold.

You can dispute these accounts with the credit bureaus, but the reselling and illegal reporting may continue. If it does, you will need to contact the collection agencies directly and tell them to stop. If they refuse, you may need an attorney’s help to get them to mend their ways. You can find a lawyer familiar with credit reporting laws through the National Assn. of Consumer Advocates at http://www.naca.net.

You might think that paying the bills would help, but you really don’t want to deal with a collector so unethical that it would change the date on a debt. Such a company is unlikely to deal in good faith, and you don’t want to give it any ammunition to do you further harm, such as access to your bank account (which it could have if you wrote it a check) or even your phone number, since it may start harassing you.

These are not our debts, and we check our credit report regularly enough to know that these also are not fraudulent charges made to our accounts or accounts opened fraudulently in our names. Is there a way to stop these calls?

Answer: Under the federal Fair Debt Collection Practices Act, you have the right to tell collection agencies in writing to stop contacting you, and they’re supposed to comply.

This, unfortunately, can be tougher than it sounds.

Some of the agencies employing automatic dialers routinely ignore the laws requiring that they identify themselves and provide you with contact information, including the firm’s name and address. If they leave a return phone number, you can try calling it or entering it into an Internet search engine to see if you can determine who’s calling.

If you get a name and address, you can write a letter telling the agency the debts aren’t yours and to stop contacting you. If the agency calls again, you can report it to the Federal Trade Commission or sue it in Small Claims Court for violating the Fair Debt Collection Practices Act.

For example, the FTC wants to restrict debt collectors from calling cell phones and sending text messages to consumers without prior consent, noting that such communication often costs the receiver money.

But creditors are likely to respond to such a change with boilerplate agreements that force the consumer to agree to such contact if they want credit, thus allowing collectors to continue to use up minutes and text allotments.

Other changes to the Fair Debt Collection Practices Act that the FTC proposed include:

• Increasing the amount consumers can collect from collection agencies for FDCPA violations. (The amount, $1,000, has been unchanged since the Act was passed in 1977. The same amount would be about $3,600 in 2008 dollars.)
• Requiring debt collectors to provide better information to consumers about the name of the original creditor as well as a full account of the total principal/interest/fees and other charges that make up the debt.
• Granting the FTC regulatory authority to issue rules under the FDCPA
• Requiring collectors to better explain consumer rights under the FDCPA. For example, if a consumer sends a timely written dispute or request for verification, the debt collector must stop collection efforts until it has offered the verification in writing/

These changes are long overdue. But what we really need is beefed up enforcement to make sure fair debt collection laws aren’t a joke. It’s still too easy for collection agencies to flout the law and for rogue collectors to skip from one agency to another.

To read the entire report CLICK HERE.

Here are some of my related columns on debt collectors:

• Don’t ignore that debt collector

• ‘Zombie’ debt is hard to kill

• Sleazy new debt-collector tactics