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Ask Susan Responses
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Dealing With Debt: Statute of Limitations |
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More Ask Susan |
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I have an account which is listed twice in my credit report, once by the creditor and the other by the collection agency. Seven years is up on the original account in August. What happens to the collection agency’s entry? Does it get wiped off also? I've read about a statue of limitation of four years. Is the four years added to the seven years, totaling 11 years? Help! -Karen |
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Dear Karen,
There are two specific, but separate, laws that protect you from being forever obligated on an old debt. Let me give you a brief overview of these two laws.
The four year timeframe you read about is probably the statute of limitations. Each state has a statute of limitation on how long a debt is considered legally collectable. This means that a creditor may not be able to obtain a judgment against you if you challenge the debt in court because you feel the debt is past the statute of limitations.
In addition, the federal "Fair Credit Reporting Act" (FCRA) states the longest any derogatory information can remain on your credit bureau file is seven years from the beginning of the delinquency that lead to the account being placed for collection or seven years from the date of last activity on the account. Even if the account is transferred to a collection agency, the seven year time frame does not re-start. The account still must be permanently removed from your credit bureau file.
Hope this helps,
The Advice Team |
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I received a letter from a collection agency for two credit cards from 1996 totaling approx $5,000.
These MIGHT be valid, and yet I think at one point they were charged off. The reason for my confusion is that I am an alcoholic, and drank chronically for many years. I am sober for the last seven years and have meticulously rebuilt my credit and my life.
Now, I really don't know what to do.
a) Can they collect?
b) Can my credit be hurt?
-Joseph |
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Joseph,
First of all, congratulations on your seven years of sobriety.
To answer your question, have you pulled a copy of your credit report lately to see what is being reported? For example, did the creditor(s) obtain a judgment for payment at any time? If not, there are two laws to protect you from being forever obligated to debt.
Each state has a statute of limitation on how long a debt is considered legally collectable. The time frame is generally between four to six years from when the payment becomes due. There are only a few states that have a statute of limitation longer than six years. This doesn't mean you still don't owe the money. You still do. It just means a creditor can't obtain a judgment against you if you challenge the debt in court because you feel the debt is past the statute of limitations. To learn about your state's laws, contact your local consumer protection office. For a list of state and county consumer protection offices, please visit the Federal Citizen Information Center's website at http://consumeraction.gov.
The federal "Fair Credit Reporting Act" (FCRA) states the longest any derogatory information can remain on your credit bureau file is seven years from the beginning of the delinquency that lead to the account being placed for collection or seven years from the date of last activity on the account. Even if you start to repay on the account, the seven year time frame does not re-start. The account still must be permanently removed from your credit bureau file.
In your case, it appears this old bill is past the statute of limitation and is past the FCRA seven year time frame for being reported. That means this debt may not be legally collectable and cannot legally be reported on your credit bureau file anymore.
Best of luck,
The Advice Team |
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My sister and I just received a bill from a collection agency associated with our mother. Our mother died many years ago and this is the first time we have been contacted about this expense. Is there a "statute of limitations" on debt? We settled our parent’s estate years ago. Are we responsible for this debt after so many years? We do not have any way to even prove its legitimacy. -Jeffrey |
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Jeffrey,
Yes, each state has a statute of limitations on how long a debt is considered legally collectable. Depending on state law, the time frame is generally between four to six years from when the payment becomes due. In addition, you and your sister may not be liable for this debt—even if the statute of limitations has not passed. Do not be pressured into paying a debt that is not your responsibility. If you worked with an attorney to settle the estate, I recommend you contact him or her to discuss your rights. The solution may be as simple as sending the collection agency a copy of the death certificate.
The Advice Team |
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The statute of limitations for credit card debt is four years in my state. When does the time clock start? When it expires, does that mean that I don’t owe the money anymore? -Chad |
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Chad,
Generally, the clock starts on the date of your last activity. Please be aware that there are many actions that could “restart” the clock. To learn your state's laws, contact your local consumer protection office. For a list of state and county consumer protection offices, please visit the Federal Citizen Information Center's website at http://consumeraction.gov.
To answer your second question, if the statute of limitations does expire, it doesn’t mean you don't owe the money. You still do. It just means a creditor can't obtain a judgment against you if you challenge the debt in court because it is past the statute of limitations.
The Advice Team |
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