If you stop paying your debts, the lender will eventually write it off as bad debt, but this does not let you off the hook. Charging or writing off debt is a legal requirement and bookkeeping maneuver for tax purposes. Depending on the size of the write-off, companies may let it go anyway.
Identification
Once a creditor has to write-off your debt, he must sue you to get a judgment. Whether he actually will sue depends mostly on how much you owe. Amounts under $1,500 usually cost too much in legal and administration fees to recover. After debts get to $1,500 to $2,000, you will probably face a lawsuit, according to CardReport.com.
Statute of Limitations
As soon as you default on a loan, the clock starts ticking on the statute of limitations---the time limit a creditor has to sue you, according to Bills.com. Statutes of limitations exist because it ensures old debts do not follow you forever. The time frame of the statute of limitations ranges from three to 15 years.
Misconception
After the statute of limitations passes, creditors can still sue you and succeed if you do not follow proper legal procedure. If a creditor sues you after the statute of limitations, you have the legal of defense of saying the debt is too old to be collected, according to the BCS Alliance. Creditors may still hound you for old debt too and threaten to sue.
Tip
States give different time limits on different types of debt. After the statute of limitations passes, you must inform the judge of the statute of limitations on the debt to stop litigation. If a creditor tries to contact you about an old debt, simply inform him on the statute of limitations. You may have to send a certified letter to stop harassing calls. Also, always make sure never to admit to the debt---admitting to the debt or repaying it restarts the statute of limitations, according to the BCS Alliance.
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