Today, with credit scores plummeting, unemployment rising, and foreclosures in every state across the nation, many Americans are now facing problems paying all their bills. Not being able to pay off your debt can be a very scary depressing aspect, however, you should learn more about the legal factors regarding to debt. This way you will not have to sit and worry about what can be done if you cannot pay your debts.
Federal law requires credit bureaus to drop all negative statements after seven years, which begins after 180 days of your last payment. On the other hand, bankruptcies will remain on your report for ten years. Some other forms of debt such as tax liens will never be removed.
All creditors have a specific time period they can sue you over a debt, which is on average 3 to 6 years. You will always owe the money to your creditor unless you file bankruptcy, but they will not be able to sue you over the debt. This means that creditors will still try to collect the money you owe, but they cannot sue you for the debt, under law.
The Statutes of limitations vary from state to state and can be very different according to the type of debt. Each state normally has a stature of limitations in place for oral contracts, written contracts, and closed end contracts, which are installment loans, and open ended contracts like credit card accounts. However, not every state agrees that installment loans are closed end contracts and credit cards are open-ended contracts. The only true way to know how your state defines the type of debt you have is by consulting with an attorney.
One thing I cannot stress enough is that even after the stature of limitations has expired, if you make any agreement to pay the debt or even state you own the debt, it will be like starting over with that debt. The stature of limitations will start over again from that date.
By the Fair Debt Collection Practices Act, a creditor cannot legally sue you after the stature of limitations has expired. This does not mean they will not try to take you to court. If you are sued, you need to go to court and prove the stature of limitations has expired on the debt.
Just remember, the debt is never gone unless you pay off the debt or file bankruptcy. The law just will not allow the debtor to sue and the debt will not be on your credit report after the stature of limitations has expired.
If you are being hounded by a creditor with a debt in which the stature of limitations has expired, you can send the collector a letter through certified mail with a return receipt requested. In the letter, you should include the statement that the stature of limitations has expired and you want all collection attempts stopped immediately.