Statute of Limitations on Debt Explained

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.

Home Prices Up

According to the Standard & Poor’s/Case-Shiller 20-city housing price index for a seasonally adjusted basis increased 0.3% for the month of June after seeing in May a 0.5% increase. Home prices are up 6 percent from the bottom seen in April of 2009 but are still below the peak seen in July of 2006 by 28 percent.

The seasonally adjusted composite index of mortgage applications as reported by the Mortgage Bankers Association for the week that ended on August 27 rose 2.7 percent. Applications for refinancing increased 2.8 percent. Purchase volume increased 1.8 percent. From the total applications, refinancing was 82.9 percent which is the highest level seen since January of 2009.

The monthly composite index of manufacturing activity reported by the Institute for Supply Management reported in August was 56.3 after seeing in 55.5 in July. Any reading above 55 shows expansion. Economists had believed a reading of 53.2 would be seen.

Total construction spending decreased 1 percent in July to $805.2 after a revised $813.1 billion in June. Economists had expected a decrease of 0.6 percent in July.

Pending home sales index, which is a forward-looking indicator, which is based on signed contracts from the National Association of Realtors, showed an increase in July of 5.2 percent after a revision in June which showed a fall of 2.8 percent.

The monthly composite index of non-manufacturing activity decreased to 51.5 in the month of August from 54.3 for the month of July as reported by the Institute for Supply Management. Once again, a reading above 50 shows expansion.

First claims for unemployment benefits decreased by 6,000 to 472,000 for the week that ended on August 28. Continuing claims for unemployment for the week that ended on August 21 decreased by 23,000 to 4.4 million. The unemployment rate increased to 9.6 percent in August from 9.5 percent in July.

Economic calendars to look forward to include on September 8 – consumer credit, September 9 – international trade, and on September 10- wholesale trade.

Home Sales Fell

Home sales on existing homes decreased 27.2 percent in the month of July, which brought the seasonally adjusted annual rate down 3.83 million from a 5.26 million homes in the month of June. The inventory of homes unsold rose 2.5 percent to 3.98 million, which makes it a 12.5-month supply at the current selling rate, which is up from June, which was at 8.9-month supply.

The seasonally adjusted composite index of mortgage applications as reported by the Mortgage Bankers Association for the week that ended on August 20 rose 4.9 percent. Refinancing applications increased 5.7 percent while purchase volume increased 0.6 percent. Refinancing was 82 percent of all applications.

Durable good orders that are expected to last three years or longer increased 0.3 percent in the month of July after a decrease in 0.1 percent in June. This rise was mainly due to better demand for commercial aircraft. Orders showed a decrease of 3.8 percent excluding volatile transportation related goods.

Sales on new homes decreased 12.4 percent in the month of July to a seasonally adjusted rate of 276,000 homes from a rate of 315,000 in the month of June. This was the lowest reading since 1963. Economists had believed to see 330,000 units.

The Commerce Department second report stated the gross domestic product, which is the total output of goods and services that were produced in the United States rose at an annual rate of 1.6 percent during the second quarter of 201o instead of the increase of 2.4 percent, previously reported.

Unemployment initial claims benefits decreased by 31,000 to 473,000 for the week that ended on August 21. Economists had believed claims would fall to 490,000 whereas continuing claims for the week that ended on August 14 decreased by 62,000 to 4.46 million.

Reports upcoming included August 31 – housing price index, September 1 – construction spending, and on September 2 – pending home sales.

First Time Homebuyers Will Pay a Bit More

The housing market collapse has been great for part of the population in the US, which are the first time home buyers. Prices were low, mortgage rates were very low, and around 58% of families in the San Diego County area can afford to purchase an entry level home as stated by the California Association of Realtors. 

This figure is just a tad down from the high that was seen during the first quarter of 2009, which at that time was at 60%, but it is still a long way from the affordable lows seen during the housing bubble. As an example, the second quarter of 2006, the California Association of Realtors only reported 23% of San Diego families could afford an entry level home.

According to the U.S. Census Bureau in 2009, homeownership rate in San Diego was 56.4%.

The California Association of Realtors using specific ways to calculate the affordability for entry level homes. One way is that a first time home buyer will buy a home that is 85% of the median price found in an area, they will use an adjustable loan, and will have 10% to put down on the home. Adjustable rate loans are not as popular since the housing market began to falter. Leslie Appleton-Young of CAR’s chief economist stated that this group is still using adjustable rates, as it is the easiest way to measure home affordability rates over a period of time.

Throughout California, the California Association of Realtors predicts that 67% of all families could afford an entry level home that is $266.750. The monthly estimated payment, which includes insurance and taxes, would be $1,470, meaning a family needs to have an income of $43,960 annually.

Appleton-Young stated, “One of the most interesting things is that U.S. affordability is slightly below California,” and went on to say,” That’s a first.”

The minimum annual household income in San Diego County would be $62,260 in order to afford an entry level-home of $377,730 with  monthly payments of $2,080. When it comes to affordable entry level homes, San Diego County is in the middle to other California regions. San Luis Obispo County region is estimated to be the least affordable with just 48% of households being able to afford an entry-level home, next comes the San Francisco Bay area at 49%. The most affordable regions for first-time homebuyers include High Desert with an 84% and Sacramento County at 80% affordability rate.

Overall, San Diego affordability is low in comparison with 37% of families able to afford a home with the median price of $392,620 explained, Appleton-Young.

The California Building Industry Association released a study stating 44% of families in the San Diego metro area during the second quarter of 2010 could afford a home. New York City was the top for least affordability, next was the San Francisco Bay area, and San Luis Obsipo.