How Old Is Too Old for a Debt To Be Collected?

Many people get themselves into a whole lot of credit card debt when they are young (usually during the college years) and then don’t bother to deal with the problem until many years have passed and they’ve grown up to the point of needing to improve their credit in order to get to where they want to be in life. These people often find themselves wondering if they actually have to pay back all of that outstanding debt or if the slate can just be wiped clean now that so much time has passed. The answer is that both may be true.

After a certain amount of time passes, the debt that you have accumulated and ignored over the years may get too old to be collected via lawsuit. It may also be too old to show up on your credit report. So technically there is nothing that the credit card company can do to you if you have failed to pay your debt and enough time has gone by. But that doesn’t actually mean that your debt has been erased. You theoretically still owe that money and the credit card company may ask you for it even though they can no longer sue you to get it.

First things first, a credit card company has a certain amount of time (called statute of limitations) during which it is allowed to sue you for the debt that you have failed to pay. This time period depends upon the state in which you and your credit card company are located. For example, the law in California is that a company must sue within four years or the debt is no longer valid for a lawsuit.

Additionally, there is a certain time period after which your credit report is no longer going to read that you have this outstanding debt. This falls under the Fair Credit Reporting Act (FCRA) and says that a credit card company can only continue reporting a negative outstanding debt for seven and a half years after you have initially failed to make a payment. The catch here is that the time period starts over any time that you do make a payment. So if you go for five years ignoring the debt and then decide to make a payment, the whole thing starts over and that negative information can be reported for the next seven and a half years.

So what does all of this mean? It means that you should try to pay off your debts within a reasonable amount of time in order to avoid the problems associated with having outstanding debt. However it also means that if you have gone for years without making a payment then you may be better off not resuming payments because eventually those debts are basically going to expire in terms of what the credit card company can do to try to get that money back from you. If you are willing to wait them out before trying to qualify for better loans and credit card rates then you can probably get by without paying.

This entry was posted on Friday, September 5th, 2008 at 3:16 pm and is filed under Debt & Consolidation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.