Two Time Limits For Debts

The general public often misconstrues the time restriction for credit reporting and the statute of limitations. Although they are both temporal constraints tied to debt, their impacts are distinct, and the events that trigger them at different points in the loan's life cycle.

The credit reporting time limit refers to the maximum length of time that overdue bills may remain on your credit report once they have been reported as past due. In most cases, the statute of limitations begins to run seven years after the account becomes delinquent. On the other hand, bankruptcy will remain on a credit record for ten years. The Fair Credit Reporting Act places a time restriction on reporting credit information. However, this does not have any bearing on the statute of limitations to collect a debt.

On the other hand, the period during which a debt is lawfully enforced is referred to as the statute of limitations for the debt. That is, the duration of time during which a creditor or debt collector may take legal action against you to compel you to make payments on a debt. The duration of the term begins on the account's last day of activity and varies greatly from state to state.

How You Can Make the Most of It for Your Benefit

Even after the period of time specified by the statute of limitations has passed, some debt collectors will persist in making collection attempts on accounts. Consumers who are unaware of the statute of limitations or are frightened by the collection agency may settle the debt to prevent more serious action, such as a lawsuit. Your argument against having to pay an old debt is the statute of limitations, which applies if you are satisfied that it has been exceeded.

When you do anything with the account, you need to be cautious not to start the statute of limitations again. Restarting the clock on the statute of limitations requires either making a payment, making a promise of payment, engaging in a payment arrangement, or charging anything to the account in question. When the clock is reset, it always begins counting down from zero, regardless of how much time has passed since the last event.

Crackdown on Collectors

Asset Acceptance, one of the largest debt buyers in the country, was sued in 2012 by the FTC. They agreed to notify consumers whose debts had expired the statute of limitations. The notice included the phrase, "Given your debt age, we will not sue" in it. Asset Acceptance was one of the defendants in a lawsuit brought by FTC. It is possible to include the phrase, "and it will not be disclosed to any reporting agency." You will still be responsible for providing evidence, even though not all collection agencies are legally required to publish this notice.

How Does It Apply to My Debt?

In most states, the statute of limitations is anywhere from three to six years; however, the restriction in one state is as high as fifteen years. Learn the debt statute of limitations that applies to your state by consulting the comprehensive list of statutes of limitations organized by a state that can be found here.

In the case of certain debts, the statute of limitations does not apply. It encompasses federal student loans, income taxes, and child support in some states, depending on where you live. Even if you haven't touched the account in many years and haven't done anything with it in that time, you cannot utilize the statute of limitations as a defense in a case that involves any of these issues.

Things That the Statute Of Limitations Does Not Cover

It is important to keep in mind that the expiration of the statute of limitations only precludes a collector from securing a judgment against you if you can establish that the statute of limitations has expired. It does not:

• Avoid having a collector file a lawsuit against you as the defendant. Using it against them in court might prevent them from being successful in their case.
• Cancel the loan. If the debt is yours, you are still responsible for paying it until the creditor writes it off, or you have it forgiven when you file for bankruptcy.
• You want to avoid having the debt appear on your credit record. The debt may be reported as long as there is still time left on the credit reporting time limit.