Debt is formed when a consumer uses credit card or any other credit but does not repay this amount
. Debt accumulates when the interest and penalty on this debt increase due to nonpayment of the money spent by the consumer.
In our country an average college student passes college with a credit card debt of roughly $2000.00. Late fee accumulates because you miss out on payments. Annual Percentage Rate (APR) is quite often very high. Inability to repay debt due to untoward circumstances makes consumers take the ultimate step declare bankruptcy.
Reality about credit card debts sinks late when you realize that you are completely buried in financial trouble
The Statute of Limitations (SOL) is the period in which the original creditor or debt collector can collect a debt from you. The SOL for credit card debts states that old debts can be collected for a period of seven years. Debt collectors cannot chase you indefinitely for a debt. If you get a call about an old debt, better check if the SOL has expired. Like everything even debts have expiry dates and if you accept paying an old debt you are actually bringing an expired debt to life.
The SOL is different from credit reporting limit. Credit reporting limit is the maximum time that credit reporting agencies can use to mention your delinquent debt on your credit report. However, bankruptcies are reported for a good ten year period and tax liens may be reported for up to fifteen years. Credit reporting limit is set by the Fair Credit Reporting Act (FCRA).
Debt collectors often ignore the SOL and attempt at collecting debts from you. This is in the hope that you would not have the knowledge of the SOL. Collectors may even sue you for the money but if you know the SOL you can use the expired SOL to justify that you don't owe the debt.
While there is one federal SOL, states in the US have their own SOL. You must check your state SOL before pursuing a case. Certain debts do not have SOL. These are child support in some states, income tax and federal student loans. Some enthusiastic debt collectors may try to use your new state of residence if you have moved in recently. They may do it all the more if this state has a longer SOL.
It is important to keep the collector from filing a lawsuit against you. If he does, you can prevent a collector from winning this by using the expired SOL. However, the SOL does not erase a legitimate debt. You have to pay it. The SOL also does not assure of a debt not being reported on the credit report.