Credit – DMCC University

Debt and The Statute of Limitations

December 5, 2023 by Jason Athas

Debt and the Statute of Limitations: Understanding Your Rights and Protections

In the realm of personal finance, debt can be a significant burden, and understanding the legal implications of outstanding debts is crucial. The statute of limitations is a legal concept that sets a time limit within which creditors can sue debtors to collect unpaid debts. This time limit varies by state and by the type of debt.

What is the Statute of Limitations for Debt?

The statute of limitations for debt essentially establishes a deadline for creditors to initiate legal action against debtors. Once the statute of limitations has expired, creditors lose the legal right to sue debtors for the unpaid debt. This time limit serves as a protection for debtors, preventing creditors from pursuing them indefinitely.

How Long is the Statute of Limitations for Debt?

The statute of limitations for debt varies by state and by the type of debt. Generally, the statute of limitations for open-ended debt, such as credit card debt, is between three and six years. For secured debt, such as auto loans or mortgages, the statute of limitations is typically longer, often ranging from six to ten years.

What Happens When the Statute of Limitations Expires?

Once the statute of limitations has expired, creditors can no longer sue debtors to collect the unpaid debt. This means that debtors are no longer legally obligated to repay the debt. However, it’s important to note that the debt itself does not disappear. The debt will still remain on the debtor’s credit report and can negatively impact their credit score.

Exceptions to the Statute of Limitations

There are certain exceptions to the statute of limitations for debt. These exceptions may extend the time limit within which creditors can sue debtors. Common exceptions include:

Fraud or Concealment: If a debtor fraudulently conceals their debt or assets, the statute of limitations may be extended or even tolled (paused) until the creditor discovers the fraud.
Partial Payments: If a debtor makes partial payments towards the debt, the statute of limitations may be restarted or extended from the date of the last payment.
Court-Ordered Judgments: If a creditor has obtained a court judgment against the debtor, the statute of limitations may be extended until the judgment is satisfied.

Protecting Yourself from Debt Collection

While the statute of limitations offers some protection, it’s important for debtors to take proactive steps to manage their debt and avoid legal action. Here are some strategies to protect yourself from debt collection:

Communicate with Creditors: Maintain open communication with your creditors, and work out a payment plan if possible. Negotiating with creditors can help you avoid legal action and protect your credit score.
Dispute Erroneous Debt: Review your credit reports regularly and dispute any inaccurate or erroneous debt information. Correcting errors on your credit report can improve your credit standing.
Seek Professional Advice: If you’re overwhelmed by debt, consider seeking professional financial counseling or legal assistance. Credit counselors can help you develop a debt management plan, while lawyers can provide guidance on your legal rights and options.

Conclusion

Understanding the statute of limitations for debt can help you navigate the complexities of debt collection. While the statute of limitations offers some protection, it’s crucial to manage your debt responsibly, communicate with creditors, and seek professional assistance if needed. By taking proactive steps, you can protect your financial well-being and safeguard your future.

DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org.DMCC is located at 1330 SE 4th Ave, Suite F, Fort Lauderdale, FL 33316.

Consumers Are Getting Smarter About Credit Scores

December 5, 2023 by Jason Athas

These days, many consumers are becoming more conscious about the role their credit scores play in their everyday lives, but at the same time, they may not know exactly what goes into it, and what they can do to improve it.

How do I obtain my free credit report?

December 5, 2023November 14, 2023 by Jason Athas

What is a credit report? If you’ve ever applied for a credit card, a personal loan, or insurance, there’s a file about you.

Debt Management vs. Debt Settlement

October 26, 2023 by Jason Athas

Out-of-control debt has a way of taking over your life. High interest rates can cause your balances to climb higher each month, and the higher balances hurt your credit score, making it more difficult to obtain financing for important household expenses or personal needs. As the debt grows, so does your stress.

If your debt is discharged, do you still owe it?

November 3, 2023October 24, 2023 by Jason Athas

I recently read an online forum which said that a creditor charges off a debt once it’s turned over to collections. What’s more, I gathered that a person does not have to repay this debt and can write “cancelled” on any invoices received from a collection agency instead of paying the bill. Is this information correct?

Unfortunately, the Internet is often a source of misinformation. If you opt to write “cancelled” on a invoice for a debt you legitimately owe, you may find yourself being sued. If you’re already dealing with the fallout from past debts, getting sued will only further complicate your situation.

Hard Credit Check Versus Soft Credit Check: What’s the Difference?

November 3, 2023September 12, 2023 by Jason Athas

Every time someone checks your credit report, the inquiry is logged.

That’s important because too many inquiries over an extended period of time can spell trouble for your credit score.

There are different ways and different reasons your credit report might be checked. Some, like hard credit checks—also known as hard inquiries or hard pulls—might have an adverse impact on your credit score. Others, so-called soft checks, are harmless. Too many hard credit checks in a short period of time could knock a few points or more off your credit score. But no matter how many soft credit checks are run against your credit history, they will have no effect.

Yours, Mine … and Maybe Ours? Advice for Couples on How to Handle Money

October 26, 2023September 6, 2023 by Jason Athas

Picking the right money-handling strategy for your family – separate finances, a joint account or something in between? – can make a big difference on how well you function and how well you get along.

It is possible to owe debts not on your credit report

December 5, 2023September 1, 2023 by Jason Athas

While most major lenders and creditors report to at least one of the credit reporting agencies, there is no requirement to report, and not all companies do.

10 questions to ask before getting a secured credit card

November 3, 2023August 15, 2023 by Jason Athas

It’s tough to get by without a credit card.

You need one to make a hotel or plane reservation, or to rent a car, even if you plan to pay cash. Responsible use of a credit card builds a good credit rating, too, marking the owner as mortgage-worthy.

But people who have never had credit or need to repair a poor credit history may not qualify for a regular credit card. For them, a secured credit card may be the only way to establish, or re-establish, credit.

What Is A Credit Score?

November 3, 2023August 14, 2023 by Jason Athas

A credit score is a number lenders use to help them decide: “If I give this person a loan or credit card, how likely is it I will get paid back on time?”