It's important to have a clear understanding of the circumstances under which debt is no longer uncollectable under state law. Every state sets its own statute of limitations for bad debt, so you must visit your state's legislature website or check online for your state's statute of limitations laws.
Identification
Bad debt falls into five main categories: open accounts (credit cards), written contracts, oral agreements, domestic and foreign judgments, and promissory notes. The same statute of limitations may not apply uniformly for each category. For example, in Kansas, oral agreements and open accounts each carry a statute of limitations of three years, whereas written agreements and promissory notes carry a statute of limitations of five years. The statute of limitations varies widely from state to state.
Consumer Credit File
According to the Fair Debt Collection Practices Act, bad debt can remain on your consumer credit file for up to seven years. After this period ends, you may submit a written request to have the bad debt permanently removed. The credit bureaus have up to thirty days to investigate your claim and remove the information.
Statute of Limitations
The clock starts ticking on debt after the last payment toward your debt is received. The clock resets every time you make a new payment. Once the statute of limitations on bad debt runs out, creditors cannot bring legal proceedings against you. The debt is considered dead -- or uncollectible -- and you are under no legal obligation to repay it.
Damages
If you receive harassing phone calls regarding bad debt, you may be eligible to receive up to $1000 in damages plus the cost of attorney's fees under the Fair Debt Collection Practices Act. You must file a case in civil court and prove your case. Submit phone records and any written correspondence containing threats along with a petition for damages. If you prove that you are the victim of harassment, the presiding judge will rule in your favor.
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