Charged-off debts never expire. A creditor or debt collector can pursue you for the rest of your life for a debt that has been charged off. Collecting the debt is another issue, however. There are laws regulating how long creditors or debt collectors have to sue you in court for an unpaid charge off.
State Statute of Limitations
Individual states have laws on debt collection called "statute of limitations." Laws vary by the state, but generally debt collectors have about six years to pursue you in court for an unpaid debt resulting from a charge off. The statute of limitations is important because it limits the most powerful weapon available to a debt collector creditor --- a lawsuit. Without the threat of a lawsuit many people might simply ignore charge offs and bad debts. However, a lawsuit can lead to bank and wage garnishment after the creditor or debt collector wins a judgment in court.
Common Misconception
A debt that is beyond your state's statute of limitations is considered "time-barred" for consideration by the courts. The laws were established to prevent people from having to worry about debt-related lawsuits forever. However, it is important to note that the debt itself does not expire. You are still considered obligated to pay it, although there may be little that the debt collector can do to collect.
Common Strategies
Some people with old charge offs simply wait for the debt to expire under their state's statute of limitation laws and for it to be removed from credit reports because of federal laws. The Federal Trade Commission reports that negative credit information more than seven years old cannot be included on your credit report, except for bankruptcy information, which can be reported for 10 years. Example: Your state statute of limitations prohibits creditors or debt collectors from winning against you in court on debt more than six years old. Federal laws require all removal of the information from your credit report after seven years. Some people with a charged-off debt that is nearly six years old might choose to simply wait fo the debt to become time-barred and then to be dropped from the credit report.
Devbt Collector Tactics
Debt collectors have strategies for resetting the statute of limitations on charged off debts. The statute of limitations clock starts from the date of last activity on a charged off account. As a result any payment activity on the account resets the clock. Even a conversation recorded by the debt collector in which you acknowledge owing an old debt could reset the statute of limitations. Once the account is reestablished a new negative entry can be placed on your credit report and will remain for seven years. These possibilities should be considered when you choose to speak to a creditor or debt collector about a very old debt.
Getting Help
Contact a nonprofit credit counselor in your area for help on determining if your old charged off debts are beyond your state's statute of limitations. Find a counselor in your area by checking the website for the U.S. Deparment of Housing and Urban Development. There are HUD-certified cousnelors across the country.
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