Understanding Statutes of Limitation

Effective credit repair requires meticulous attention to detail. If you enter into a discussion with a collector to pay a debt without knowing your statute of limitation you are likely to pay more than necessary. If you take five minutes to check your statute of limitation you may save thousands of dollars.

Statutes of Limitation vs. Credit Reporting Limits

The statute of limitation for a debt is the maximum period of time that a collector can enforce collection of a debt through the court system. Statutes of limitation are state and debt-type specific and are almost always far less than the reporting period limit for credit reporting purposes. Statutes of limitation for defaulted open ended accounts such as credit cards, for example, range from three years and up depending on the state.

You May Need to Check Two States

You may find your state’s statutes of limitation easily on the Internet. Please note that you must check the statute of limitation for both your current state of residence as well as the state where you incurred the debt, as the collector can apply the one they find most favorable (the longer one!).

Negotiate From Strength

Once the statute of limitation has expired a collector can contact you, but they no longer have any legal leverage. This gives you two valuable credit repair options; you can negotiate the balance from a position of strength, or you can opt to ignore the debt altogether without fear of repercussions.

Or Ignore the Debt

If you choose to ignore the debt you can send a cease communication letter to the collector and they must stop all collection efforts. The collection will fall off your credit report naturally when the reporting period elapses. And if the collector does decide to sue, you need only show up and raise your statute of limitation defense and the case will be dismissed. Please note that cease communication letters are a powerful credit repair tools but must be used carefully and with knowledge of the subject statute of limitation. If in doubt please consult a credit repair professional.

Beware of Lingering Collections

Collections can report for seven years plus 180 days from the date of the original default. The original default occurred the first time you were 30 days late in the sequence that led to the collection status. Reporting period start dates cannot be reset by a collector, or by the sale of debt between collectors. Unfortunately, collectors have a variety of ways to “accidentally” reset the reporting period start date, and so consumers should be very leery of collections that seem to linger.

Duplicates are Not Allowed

You should also note that collectors who no longer own a debt are supposed to withdraw the entry entirely from your credit report. Unfortunately, there is no incentive for them to do this, nor is there any punishment for failure to comply, so once again consumers should be on the lookout for the erroneous appearance of duplicate collections.

Credit Repair Success

Credit repair requires meticulous attention to detail. Your statute of limitation is just one of the essential ingredients involved in credit repair success. Of course, if you are in our credit repair program we will do the research for you and counsel you accordingly. Good luck!