Three Time Periods For Collectors To Collect Debts
Three Time Periods For Collectors To Collect Debts.
This question actually touches on three separate time limits.
First, a collector generally has three to six years to sue you. This is the statute of limitations.
Also, to be precise, a collection agency must actually own the debt to sue you.
Finally, a debt collector can generally collect for an unlimited time but the collector cannot sue (or threaten to sue) if the statute of limitations has expired.
The bill collector cannot credit report (or threaten to credit report) if the seven year time period for credit reporting has expired.
And the collector must tell you that if you make a payment, you may restart the statute of limitations.
Let’s look at these in more detail.
Debt collector has 3-6 years to sue you on a debt
We won’t get into all the arguments about whether for credit card debt it is 3 or 6 years.
For most car loans, it is 4 years from when the entire debt is due (usually right before or after repossession).
The bottom line is there is a period of time to sue you.
If the debt collector waits too long to sue, then it is illegal under the FDCPA (Fair Debt Collection Practices Act) to sue you.
And you would also have a valid defense to the lawsuit as a solid statute of limitations defense should win you the lawsuit.
But often the time limit to sue and the time limit to credit report get merged so let’s talk about that next….
Credit reporting can only happen for 7 years after your first major delinquency with the account
Positive credit reporting can stay on your report indefinitely and that’s fine — it is positive after all!
But what about negative?
“If the time limit to sue (statute of limitations) is up, doesn’t the credit reporting have to go away?”
These are two completely unrelated time periods.
Here’s the deal on credit reporting.
We look at the first major delinquency which is normally six months without paying.
That marks our spot on a time line.
And then you go forward 7 years.
At the end of the 7 years, the credit reporting must be deleted.
This is true whether the statute of limitations is 3 years or 33 years.
It doesn’t matter.
Credit reporting time limits are not affected by a state statute of limitations.
But what about a debt that is too old to sue and too old to credit report, can a collector still collect against you?
Well . . . maybe . . . if the collector is very careful.
Any debt collector that is collecting after the statute of limitations or after the time period to report needs to be very clear about what it can and cannot do to you
The debt collector can’t threaten to sue you.
Can’t threaten to credit report.
Can’t say, “We might sue you” or “We might credit report.”
There is no “might” about it — it is illegal to do so and therefore it is illegal to threaten you.
And the collector needs to tell you that the debt is “out of statute” meaning you can’t be sued for it.
Since collectors often claim that if you make a single payment you restart the statute of limitations, you need to be told this by the debt collector.
They disagree and of course don’t tell you.
Then when they get sued they complain about the unfairness of being sued.
However, the truth of the matter is collecting on ancient debt is a minefield and collectors simply don’t want to be bothered to step carefully through this.
If you live in the state of Alabama and you have any questions, give us a call at 1-205-879-2447.
We will be glad to help you in any way we can.
I look forward to chatting with you!
Have a great day.