The Statute of Limitations - Debt Collection
/[plus1 count="true" size="standard"][/plus1] The statute of limitations is a rule of law that determines how long something is active -- whether it's the statute of limitation on a debt or on a credit report. The rule, often referred to as tolling of time is a method of protection against old debts.
Knowing this type of protection exists makes you want to shout it from the rooftop to anyone and everyone. You cringe at the thought of some poor guy repaying an old debt that was expired simply because he didn't know better.
Perhaps it's a moral obligation but let's be real -- people pay out old debts of intimidation all the time and often even if they're not even sure the debt is accurate.
Education is SO key in dealing with delicate debt issues. Once an account has gone into collections, you're dealing with a whole different situation than you would with just making your credit card payment. Once the collection cycle has begun its now a matter of survival and one of the best tools is the statute of limitations because it can protect you in so many ways.
The statute of limitations can stop lawsuits, debt collectors and aid in fixing your credit reports. Before you pay any account that has gone into collections make sure you check the SOL first.
Each state has its own SOL so you'll need to check the rule for where you live or where the contract was entered into. Where the collection agency or creditor is located doesn't matter.
If you find the SOL has lapsed then you can immediately cease and desist the collection agency and bar them from any further collection attempts. Likewise, if they've filed suit and you discover the debt has expired, be sure to advise the court of it otherwise the judgment WILL be entered. It's completely your responsibility to advise the court of the expired SOL and if you dont -- they wont check for themselves.
Finally, remember that paying a collection account isn't going to improve your credit score on its own. Sometimes people will pay an old debt because they assume it will improve their credit scores but once a debt is charged off or in collections, that wont happen.
Instead, if the debt's expired you can rid yourself of it entirely but be sure its the credit report SOL that is expired -- as the two are different. The SOL for credit reports is 7 years from date charged off unless your specific state offers more protection. In that case you would use the state SOL not the federal FCRA SOL.
If the credit report SOL isn't expired but the debt is you can either wait for it to expire on your credit reports or decide to pay it if the collection agency agrees to completely delete the entry in exchange. Get it in writing, of course!
