Is Your Debt Still Collectable?



Posted: Tuesday, October 20, 2009

by
Finance the Dream

Old debts sometimes seem like they lurk around forever.

Fortunately, lenders can't collect on debts that are beyond their statute of limitations. Other than federal student loans, child support and income taxes, all debts have a statute of limitations.

Prior to the expiration of the statute of limitations for a debt, a creditor may use the court system in order to extract payment from you. Once this has passed, they may no longer win a judgment against you.

The date from which the time frame of the statute of limitations is calculated is the accounts date of last activity. Every state has their own guidelines. 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.

Bankrate.com has a great resource of each states rules: http://www.bankrate.com/finance/credit-cards/state-statutes-of-limitations-for-old-debts-2.aspx

Many original creditors will try to convince you that the statute of limitations does not apply to them! This isn't true! Statute of limitations laws apply to collection agencies and original creditors just the same.

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! Credit Reporting time limits are dictated by the Fair Credit Reporting Act. This has nothing to do with the statute of limitations.

If you have old debt, knowing your states statutes is critical. It isn't uncommon for collectors to attempt to collect on accounts beyond the expiration of the statute 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! That is why it is especially important that you know your rights. 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.

Special care should be given to any communications with collectors of old accounts. 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.

Don't forget any action on the account can restart the timeclock. In some states, this can even included a verbal promise to make a payment. Making a charge on an account, making a payment or entering into a payment agreement will also restart the clock. Proceed with caution!

Vincent Polisi is the founder of Credit Repair College . For more information on how to fix your credit score and how to improve credit report please visit him on the web.

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