Now Vantage Debit MasterCard
Turned down for a checking account? This debit MasterCard
offers free online check writing and bill pay, free paycheck
direct deposit, and money transfer service. No
credit check or CheckSystems. Instant online approval.
A subject of great concern to many of those with damaged credit
is the issue of time limits. The two main categories are collection-related
Collection Of Debts
Collections Action - A creditor
or third-party collection agency can legally demand or request
payment on a debt, via letters and phone calls, forever, as long
as the debt remains unpaid. A debtor can order a third-party collector
to cease communication, as per the Fair
Debt Collection Practices Act, which should stop routine demands
from that source. (See our Collection
Agency FAQ for details.) In practice, the older a debt is,
the less vigorous the collection efforts will be, and the more
likely the creditor or collector will give up easily. And, unless
the debt is secured by some type of property (e.g. a car), they
cannot actually force a debtor to pay without a lawsuit.
Lawsuits - When a consumer
is seriously delinquent (late) on a debt for a significant amount,
there is the possibility of the creditor filing a lawsuit. The
time limit for doing so is known as the statute of limitations,
which is set by individual states. The relevant statute is the
one for the state in which the debtor resided at the time of the
delinquency. The expiration of the statute of limitations covering
a debt will not necessarily prevent a lawsuit, but it will
provide an absolute defense, whereby the debtor is simply required
to file a response with the court, pointing out this fact, in
order to have the suit dismissed. Here is a chart with the statute
of limitations for each state and type of debt.
Judgements - If a lawsuit
has already been filed and won by a creditor, there is another,
separate statute of limitations for enforcing (collecting) the
judgement. Here is a chart with the judgement
enforcement time limits for each state.
Federal Taxes - Ten years
from the date of the assessment for delinquent amounts, unless
a lien has been filed. Tax liens on, for example, real estate,
remain until the back taxes have been paid.
Student Loans - There is
no statute of limitations or other time limit for lawsuits
or other enforcement action on defaulted federal student loans.
The time limits for various types of information to appear on
consumer credit reports are set by the federal Fair
Credit Reporting Act.
Making payments or partial payments on bad debts does not
effect the running of the credit reporting time limits, except
in the case of tax liens and federal student loans. All other
types of items should expire on schedule, based on the original
dates, regardless of when or whether they are paid. There was
previously a great deal of confusion over the starting point,
which could have been interpreted as the date of the last activity
on the account. This resulted in the possibility of "re-setting
the clock" on an old bad debt by making a payment on it,
or by paper-shuffling on the part of collection agencies. The
issue was clarified in the 1996 amendments to the FCRA, which
set a specific starting date related to the original delinquency
date (see FCRA Section 605 (c)
Inquiries - Two years.
Late Payments - Seven years
from the month in which the late payment was due. If there are
multiple late payments in one account item, then they will each
Charge-Offs - Seven years.
The time runs from the date of the delinquency, plus 180 days.
If a payment was due on an account on January 1, 2000, but the
debtor defaulted, and never caught up to become current again,
and the account is eventually declared a charge-off by the creditor,
then the seven year reporting time limit starts running on July
1, 2000, with the item scheduled to expire from his/her credit
reports on July 1, 2007. Here is our article
Collection Accounts - Seven
years. The running of this time limit is the same as with charge-offs.
The date of delinquency still refers to the original delinquency
with the original creditor, regardless of when the collection
agency began working the debt. This includes debts that have been
bought by a collection agency. Collection agencies cannot legitimately
"re-set the clock."
Lawsuits And Judgements -
Seven years or until the governing statute of limitations has
expired, whichever is longer.
Bankruptcy (Chapter 7) -
Ten years (from the date of entry of the order for relief or the
date of adjudication.
Bankruptcy (Chapter 13) -
Paid Tax Liens - Seven years
from the date of payment.
Unpaid Tax Liens - Forever
(unless paid - see above.)
Unpaid Federal Student Loans
- Forever (unless paid, after which they can appear for seven
The above time limits apply to credit reports which would be
available to creditors for most types of credit applications.
However, the credit bureaus are legally permitted to disclose
older information in the following situations:
A credit application involving a principle loan amount of $150,000
An application for a life insurance policy with a payout of $150,000
An application for employment in a position paying $75,000 per
year or more.
Credit Problems Menu