If you’re one of those who wishes to pay off debts brought on by installment loans and other loans, then heads up! The time has come for this debt cycle to stop.
Debts have an expiration date known as the statute of limitations or abbreviated as SOL. This means that debt collectors are kept from pursuing you for your debts indefinitely. So before you agree to pay an old debt, first make sure that the statute of limitations hasn’t expired. If it has, you might not have to pay for your loan.
Many times, people get the statute of limitations confused with the credit reporting time limit. While they’re both time limits related to debt, both have different effects. Typically, the credit reporting time limit is the maximum amount of time credit bureaus can report delinquent debts on your credit report. For most types of accounts, it’s seven years from the date of delinquency. However, bankruptcies are reported for 10 years and tax liens can be reported for up to 15 years. Also, the credit reporting time limit is dictated by the Fair Credit Reporting Act and does not influence the statute of limitations for collecting a debt.
On the other hand, the statute of limitations for collecting a debt is the period of time that a creditor or debt collector can use the court to force you to pay for your debts. The time period starts on the accounts last date of activity and varies by state. Generally, the statute of limitations starts on the last date of activity on the account. However, keep in mind that this can be different from the date the account became past due. Usually, the credit report will include the accounts last date of activity.
Even if the statute of limitations has expired, some debt collectors will continue to attempt to collect your debts. Most of them hope you don’t know about the statute of limitations and you’ll pay if they threaten you enough. In some cases, they may even file a lawsuit against you. If you are certain the statute of limitations has expired, you can use this as justification that you do not have to pay the debt.
However, be careful when counting the number of years for the statute of limitations. Anytime there is an action on an account, the statute of limitations is restarted. So, making payments, a promise of payment, entering a new payment agreement or even using the account can restart the statute of limitations. And when the clock restarts, it restarts at zero, no matter how much time had elapsed before the activity. Thus, you will not be able to enjoy the benefits of the statute of limitations.
Take note that there are debts that don’t have a statute of limitations. This includes federal student loans, child support in some states and income taxes. Also, keep in mind that when the statute of limitations expires, it only prevents a collector from winning a judgment against you if you can prove the statute of limitations has indeed expired. But, it does not keep a collector from filing a lawsuit against you, erase the debt if it is legitimately yours or prevent the debt from being reported on your credit report. The debt can be reported as long as the credit reporting time limit allows.