The statute of limitations on a debt limits the amount of time a creditor can sue you to recover the funds you owe. It also limits the amount of time a default can stay on your credit report. These laws, designed to protect you from collections many years after you have defaulted, can be complex and vary by state and by type of debt.
Federal & State Debts
Federal debts, such as tax liens and judgements, typically expire after six to 10 years. This can depend on the type of contract you signed and the type of debt. If you do not pay your federal debts, the lien or judgment may remain on your credit score for seven years or more. Each state has its own laws regarding SOL on judgements and liens, and some do not use any SOL. You can look up laws regarding your state's SOL through legal resource libraries.
Private Time-Barred Debts
Private loans also undergo rules according to the SOL of each state. The SOL of your debt will, again, depend on the type of debt and contract you signed. For example, an open-end debt, such as a revolving credit line, the SOL starts when the first payment was due. However, some states do have special regulations on credit card debt. Another factor affecting the SOL for your debt is whether your contract included a Signed Under Seal provision; signed under seal simply means there was an embossment or wax seal present on the contract, further validating the official agreeement. This can extend the length of your debt beyond the normal SOL.
Student Debts
If you have defaulted on private student debts, the private loan SOL in your state will apply. For federal student debts, the government may not be subject to an SOL when collecting. Part of your Social Security benefit payments can continue to be withheld long after the SOL has expired for a federal debt. Therefore, federal student debt default is a very costly form of default; it is very difficult to have these debts forgiven under bankruptcy as well.
Help for Time-Barred Loans
If you are contacted by a lender regarding a loan you feel is past the SOL, you should contact your state consumer protection agency immediately. Before responding to any collections agency with payment or other form of notice, simply ask for a verification of their right to collect the debt. Do this in writing, and save a copy of your correspondence. A collections agency must respond to this request, and in the meantime you can research your rights with the consumer protection agency. If you make a payment on the loan, the statute of limitations may reset, so it is important to withhold payment until the debt has been verified.
0 comments:
Post a Comment