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Posts Tagged ‘statute of limitations’

This debt should have long since fallen off your credit report. Under the Fair Credit Reporting Act, negative information such as the 90-day late payment you mentioned can only legally remain on your credit file for 7 years from the time of your delinquency. In your case, that would be seven years from the time you missed a payment or defaulted (i.e. November 1986). Because your debt is nearly 25 years old, it should definitely no longer appear on your Equifax, TransUnion or Experian credit files. If it does, simply initiate an online dispute with the credit bureuas and request that the credit account be removed on the grounds that this is outdated information. There is also a separate “Statute of Limitations” that doesn’t apply to your credit, but to the length of time after which a debt is no longer legally enforceable. After a debt, such as a credit card bill has run its statute, or expired, a creditor can no longer legally sue you in court, get a judgment against you, or do anything to pay you pay an old debt. In most states in America, the statute of limitations on old debts runs between 3 and 10 years. So again, from this standpoint too, that old debt should not cost you any money — or any worries.

It’s kind of odd that American Express wouldn’t be able to track down this old debt that you had – especially considering it wasn’t chump change. It’s very likely, though, that the $12,000 was assigned to a collection agency or simply written off as uncollectable – especially since it was apparently more than three years ago and you were just 20 years old. As you were/are a college student, I’m assuming you weren’t making big bucks back then (or now) and Amex may have known that their chances were between slim and none, in terms of getting you to pay back what you owed. What to do now? Pull each of your credit reports from Equifax, Experian and TransUnion. You can get them online free of charge via www.annualcreditreport.com. See if that Amex debt shows up on your credit reports as a collection account, charge-off, judgment, or anything else negative. If not, do nothing. If so, contact the creditor/collection agency listed only if you are financially prepared to begin a repayment plan to pay off what you owed. Otherwise, do nothing.

The Statute of Limitations on Credit Card Debt

Lastly, here are a few ways to check the statute of limitations in your state. Each state has different statutes of limitations for past-due debts, depending on if the debt was based on a written contract, an oral contract, a promissory note, or an open account. Credit cards are usually categorized as open accounts. The statute of limitations for credit card debt ranges from 3 to 10 years, based on where you live. You can click the following link for a state-by-state list of statute of limitations. themoneycoach1.wordpress.com/2009/09/14/statute-of-limitations-on-debt/.

Alternatively, to check the statute of limitations on debts in your state, contact your State Attorney General’s Office or go to www.naag.org and click “The Attorneys General”. I checked for Maryland, since you mentioned that state and I believe that is where you live. You are correct that the statute of limitations there is three years. All the more reason, as I suggested, to just do nothing about that debt. Chances are no one is contacting you about it because the statute of limitations has expired and the debt is no longer legally enforceable.

Your Credit Rating

This does not mean, of course, that it can not still appear on your credit report. That’s another matter entirely. Negative information, such as late payments or collection accounts, can stay on your credit report for 7 years. If this info is on your credit report, rest assured knowing that because it is more than 2 years old, it is likely doing far less damage to your credit rating than it probably did more than three years ago when the account first went delinquent.  So if I were you, I wouldn’t worry excessively about it.

Even though it’s stressful to deal with debt collectors, ironically, it’s when your account is past due that you are often in the best position of all to negotiate with bill collectors and collection agencies. You have something that bill collector wants – cash. They also have something you want – the power to update your credit report, and to go away. So your strategy, in a nutshell, should be to dangle the cash carrot before their eyes – whatever amount of cash you have. Read on for more tips about your options for dealing with debt collectors. This information is adapted from my book, Perfect Credit: 7 Strategies to a Great Credit Rating.

What To Ask For From the Collection Agency

Depending on the status of your account (open, closed, charged-off, etc.), and how far behind you are in your payments,  your goal should be to bring your account current,  to set up a payment plan, or to agree on a reduced amount that the company will accept in lieu of full payment. In all these cases, what you’re really doing is settling your account and/or restoring it to good standing. In exchange for doing that, you must insist on getting the bill collector’s agreement to delete negative information that was previously reported about you. At the very least, they should update their records to reflect a “paid” current status. But often collection agents will do this, and keep in your credit file such notations as “was 60 days late.” Therefore, in most cases, it’s best to firmly negotiate for the outright elimination of negative information in your credit report.

Avoid Sending Post-Dated Checks

When you reach an agreement, put it in writing and have both sides sign the pact before you pay a dime. This way you’re protecting yourself if the person you’re negotiating with reneges on your deal. Don’t ever agree to send a post-dated check or a blank check to a bill collector. First of all, you’re giving them too much of your personal information by supplying them with your checking account number and bank name. Additionally, too many consumers report having been burned by bill collectors who cashed checks for more than they should have or who deposited checks ahead of the agreed-upon date.

If you can’t pay a debt, creditors and bill collectors may be willing to settle out of court with you for a lump sum payment of less than the amount you owe, or a monthly payment plan, but they also will not hesitate to sue you for the full amount of the money you owe them – if they feel the debt is large enough to go through the hassle, time and expense of going to court. So what should you do if you receive a summons and complaint from a creditor? In a nutshell: Answer it.

What Happens If You Do Not Answer the Complaint?

If you choose not to answer the complaint, the Court will enter a judgment against you, determining that you owe the creditor or bill collector whatever amount they asked for. You may even be told to pay their attorney fees. The creditor or bill collector can then use that judgment to garnish your wages, take certain monies from non-exempt bank accounts or put a lien on your property.

If you answer the complaint (and you usually have about 20 days to respond to the plaintiff’s claims), you preserve your right to be able to argue your position in court. You also will be notified of any future court dates. You can use your time in court to state why you don’t owe the money they claim.

What If You Do Owe the Money they Claim?

Even if you do know for sure that you owe the exact amount the debtor claims, you can still use your time in court to state another amount that you can afford to pay. Although typically, if you admit you owe the alleged amount, a judgment against you for said amount will be rendered. Your real leverage comes simply by answering. The debtor does not want to appear in court any more than you do. They simply want to get paid. Once they see how time-consuming this may become for them since they are not receiving a default judgment, they may be more willing to enter a settlement agreement with you.

What If You Don’t Have the Money to Pay?

It doesn’t matter if you don’t have the money. The debtor can still sue and the Court can still enter a judgment against you. Being broke is not an excusable reason to back out of your financial responsibilities, as the debtor is willing to shake the money out of you if it could. The courts will likely require you to file a financial statement and affidavit concerning your case and your finances. If you can show how you don’t have the funds to pay, or that you lack a steady income, the creditor or collection agency may be more willing to negotiate with you for a settlement plan. Of course, they don’t have to enter into a payment plan with you. They can reject your offer and then sue you for the full amount. A creditor or collection agent is more likely to reject a payment plan if they believe you have the means to pay, if they know that you have wages they can garnish, or if they are aware of property they can attach a lien to, or a bank account they can raid. It is often, however, in the creditor’s financial interest if they reach a settlement plan with you if you don’t have the means to pay.

Once an account has been charged off or written off as uncollectable, you may be in a better position to negotiate a lump sum payment to settle your debt. In this instance, you might try offered 25% or so of the balance you owe. Be careful with offering a monthly payment plan. Because if you miss a payment, the clock can start all over again for the full amount of the debt you owe. And negative information could be on your credit report for another seven years.

What to Do When You Get a Summons Or Have to Go To Court

Creditors can sell your debt and when they do, collection agencies will often try to threaten you with court action in order to get you to pay an alleged debt. Technically, it is illegal for collectors or creditors to threaten court action if they do not intend to carry through with it.  Taking you to court is time consuming and expensive for them, and there is no guarantee it will result in the outcome the creditor wants.  So typically, a court action is a tactic to get you to fork over money, or to obtain a default judgment against you if you don’t respond to a summons and complaint. If you do get a complaint, follow steps:

1) Answer a summons and complaint. If a creditor serves you with a summons and complaint, not merely a letter saying you owe debt, then you must answer within a certain timeframe set by your state laws (perhaps 10, 20 or 30 days), in order to avoid a default judgment.

2) Know the statute of limitations. There is a time limit on how long creditors have in which to try to obtain a judgment against you for the money you may owe them.  That “statute of limitations” varies by state and type of debt.  Typically, it is anywhere from 3 years to 10 years. A creditor can use the limits in your state or the state where they are located. They will often use the state with the longest statute of limitations, because it is obviously beneficial for them. To check the statute of limitations on debts in your state, contact your State Attorney General’s Office or go to www.naag.org and click “The Attorneys General.”

3) Realize that credit bureaus limits are not the same as debt statute of limitations. Federal law typically requires credit bureaus to drop negative information after about seven years from the date of your first missed payment. (There are exceptions, such as bankruptcies can stay on for 10 years, and tax liens can stay on for longer). If you live in a state with a 3-year statute of limitations on legal collection of debt, it will still show up on your credit report.  If live in a state that allows judgments to be entered for 10 years, it is possible the debt came off your credit report after 6 years.  So do not use your credit report to help you determine if you owe debt. You can use it, however, to check to see when the creditor first considered you to be delinquent.

If the credit card is still open, then by all means pay if off if you can. But I think your question is referring to an account that you had a decade ago that went delinquent because you never paid it at all. If that’s the case, my advice to anyone in this situation is this: if you can afford to pay a debt, then go ahead and do it. That’s the right thing to do because you did, after all, go out and make the charges. No one forced you or put a gun to your head to make you spend on that credit card. Also, you will learn a good financial lesson in honoring your obligations. But in other instances, especially in this tough economy, certain old debts are best left in the past.

Some Old Debts Are Best Left in the Past

If you are cash strapped and really don’t have the money, or it would be a big financial burden to pay that old debt, then from a credit management standpoint, you should probably just let that old debt stay in the past. Negative information, such as a late payment or collection account, can stay on your credit report for seven years from the date of last activity. So if you last used or paid that card in, say, the year 2003, then in 2010 it will fall off of your credit report. Also, you should know the statute of limitations for credit card debts in your state. They can be anywhere from 3 to 10 years. Once the statute of limitations expires, a creditor can’t sue your, try to garnish wages or get a judgment against you for non-payment.