Statute Of limitations On Debt: SOL
Statute Of Limitations On Debt:
Thousands of hard working people do go periods of hard financial times, especially when they lose their jobs, get demoted, or the company they work for shuts down or goes out of business. Unfortunately, the outcome of financial hardships are being behind on your credit obligations and when your financial situation does not improve, many of your credit accounts go into default and into collections. Many folks have unpaid and/unsatisfied debt that has been aged and are contemplating filing bankruptcy. The thing is that bankruptcy can be avoidable if your old debts have been aged and have passed the statute of limitations on debt. Statute of limitations on debt are a time period where a debt collector or creditor has their chance to collect a debt and can use whatever means allowed by law such as sending you demanding letters, calling you, or filing a law suit and getting a deficiency judgment issued against you in court. Once the statute of limitations expires, you are no longer obligated to pay the old debt. In a sense, it is an expiration period for uncollected debt. Before you decide to pay an old debt or judgment, make sure that the statute of limitations on debt has not expired. If the statute of limitations on debt has expired, you are not obligated to pay the debt.
Credit Report: Reporting Mandates
Your statute of limitations period on old debt is different than the derogatory credit reporting period. By law, the three credit reporting agencies, Transunion, Experian, and Equifax, can only report your derogatory credit for a period of 7 years from the date of the last activity. However, your statute of limitations on old debt varies from state to state. If your statute of limitations on a delinquent debt expires in 5 years from the date of last activity, the credit reporting agencies can still report it for another 2 years and after 7 years from the date of last activity needs to fall off from all of your three credit reporting agencies. On the flipside, if your statute of limitations is 10 years for an old written debt, the credit reporting agencies need to remove it from your credit report after 7 years from the date of last activity but the creditor and/or debt collector still has 3 years to go after you to collect on their delinquent debt. Most bad debt can only remain for 7 years from the date of last activity with the exception of Chapter 7 bankruptcy which is 10 years from the discharge date and tax liens which can be reported up to 15 years from the issuance date. The credit reporting time period limit is set by the FCRA, stands for the Fair Credit Reporting Act, and has nothing to do with the statute of limitations on debts.
Mechanics Of The Statute Of Limitations On Debt
Every consumer who has prior unsatified debts or judgments should become familiar with statute of limitations rights for consumers. The statute of limitations start date is the date of last activity on your credit account. The date of last activity is the date you last paid your debts and the date it was reported late on your credit report. The three credit reporting agencies has a column for DLA, which mean that it is the date of last activity. This DLA is what sets the starting clock for your statute of limitations. If you make a payment on an old debt, the statute of limitations period is restarted and the SOL start clock starts all over again. Even if you make a $5 dollar, this reactivates the DLA and your statute of limitations period gets a fresh start. Bottom line is not to pay or contact you old debt collectors or creditors and hope that your statute of limitations period expires.
Note Statute Of Limitations On Debt
Please note that not all debt collectors will stop their debt collection activities just because the statute of limitations period has expired. Debt collectors are ruthless and will try to get you to pay whatever they can drain out of you. They will still try to collect on debts that they know the SOL period has expired so you as a consumer, need to tell them that you are aware of your rights and that the statute of limitations period has expired. Every state has its own statute of limitations expiration period. We will cover this on our next blog.
Debts Exempt From Statute Of Limitations On Debt
Not all debts are exempt from statute of limitations. State and federal income taxes are not exempt from statute of limitations laws. All government loans such as federal student loans are not exempt from statute of limitations laws either. Child support and/or alimony payments are normally not exempt from statute of limitations laws in most state.
Some debts don’t have a statute of limitations. This includes federal student loans, child support in some states, and income taxes. You cannot use the statute of limitations as a defense in a lawsuit regarding any of these.