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Advice on Settling a Five Year Old Debt - The Bills.com Blog
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Advice on Settling a Five Year Old Debt
Question: How do I make or get a credit card company to settle that is over 5 years old without anything being paid on it?
Answer: Whether or not you should attempt to negotiate a settlement with this creditor depends on your state’s statute of limitations (SOL) for the collection of debts. In many states, once five years has passed, a creditor can no longer pursue legal action to collecta debt. For example, in California, creditors have four years to sue consumers to enforce a debt, while in Rhode Island they have 10 years. To learn more about statutes of limitations for the collection of debts in various states, I encourage you to visit the Bills.com website. I also encourage you to consult with an attorney licensed to practice in your area to discuss the specifics of your situation and to help you determine if the statute of limitations for your creditor to sue you has expired.
If you determine that your state’s SOL for the collection of debts has expired, the likelihood of the creditor attempting to sue you to enforce the debt is much less. While the passing of the SOL does not mean that a creditor cannot sue you, if a lawsuit is filed you should have an absolute defense against the lawsuit. If you respond to the suit stating that the SOL has expired, the judge should dismiss the case. Keep in mind that in most states, the SOL begins running from the date you last made a payment on the account. This means that if you paid just a few dollars to a collector a couple of years ago, the running SOL for that debt could have been reset. Also, keep in mind that the passage of the SOL does not forbid a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit. You can generally stop collection calls by sending a cease and desist letter to the creditor–for more information about sending cease and desist letters, you
can visit ihatedebt.com .
Your state’s SOL has little to do with how long accounts can appear on your credit report. The length of time credit accounts can appear on your credit report is governed by federal law, specifically the Fair Credit Reporting Act. Generally speaking, negative listings will appear on your credit report for seven years from the date of charge-off, while bankruptcies will appear for ten. Therefore, if your state’s SOL is five years, an account can appear on your credit report for a bit more than two years after your state’s SOL has passed. A new company purchasing your account cannot lengthen the time that the account can appear on your credit report. Be careful, though, because many debt purchasers try to change the date of last activity on old accounts so they appear on your credit report for a longer time. You need to pull your credit report and carefully review the accounts in question to make sure that no unauthorized changes have been made. If you find any suspicious information on your credit report (for example, if an account’s delinquency date had been changed) you should dispute the listings with the credit bureaus. The Federal Trade Commission offers a helpful guide to disputing credit listings on its website. To find out more about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com
Credit Resources page.
If you choose to settle your debt, either because you determine that the statute of limitations has not expired, or because you wish to remove the delinquent balance from your credit report, you should contact the creditor or the collection agency handling the account to discuss what amount the creditor will accept to settle the debt. You may wish to offer 30% of the balance to begin, observe the creditor’s reaction, and then increase your offer as you feel appropriate. I would expect that a creditor with a debt as old as the one in question will likely settle for 40% to 50% of the balance owed. You should know that if a creditor accepts a reduced balance settlement, it will usually expect the settlement to be paid within a matter of days, so you should make sure that you have the necessary cash available to tender payment before you begin negotiations in earnest. You should also remember that settling a debt should cause the account to report a $0 balance to the credit bureaus, but it will not cause the past derogatory marks to be removed from your credit report, so settlement may not be worth the money if the statute of limitations will expire in the near future. For more information about negotiating with your creditors, you can visit the debt settlement section of Bills.com.
I hope the information I have provided will help you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
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