Before I explore the issues raised in your question, we need to establish a few definitions and concepts.
Charge Off
“Charge-off” is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs between 180 and 240 days from the date of your last payment. The fact that an account is charged-off does not mean the debt may not be collected later, or is canceled or forgiven. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.
Because an account is charged off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency. See the Bills.com resource Charge Off for a more complete discussion of this oft-misunderstood phrase.
At some point, and it varies by your state of residence, a debt becomes so old that your state's laws may provide relief. This is where your state’s statute of limitations comes in.
Statute of Limitations
All states have a body of statutes in their codes of law called, “Limitations of Actions,” commonly referred to as the statutes of limitations. The idea behind these laws is that we as a society have decided that we don’t want old debts hanging around forever — we want people and businesses to be able to move on with their lives without worrying about being sued.
The length of time a creditor has to sue you depends on your state of residence and the type of debt. For example, many states allow longer for creditors to file suit to collect on closed-ended consumer loans than on credit card debts. Most states give credit card issuers three to four years to file suit after default, but some states allow as many as 10 years. See the Bills.com resource Statute of Limitations to learn more about this sometimes tricky part of civil law.
To see your state's statute of limitations, read the Bills.com Collection Laws and Statute of Limitations page. If a creditor files a lawsuit after the allowed time, the court will usually throw the case out and not allow the creditor to file suit again (called dismissed with prejudice).
However, you must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired. Although the periods vary from state to state, I believe that there is only one (Ohio) that is longer than 10 years.
Remember: The passing of the SOL does not mean that a creditor cannot sue you. It means if a lawsuit is filed you should have an absolute defense against the lawsuit if you raise the defense. Also, keep in mind that the passage of the SOL does not prevent a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit.
Credit Report Rules
Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies (CRAs). The specific law is called the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer’s credit report for up to 7½ years. To determine when an account will be removed by the CRAs (TransUnion, Equifax, and Experian and others), add 7 years to the date of first delinquency. The date of first delinquency is shown in credit reports. Subsequent activity, such as resolving the debt or one debt collector selling the debt to another collector, is irrelevant to the 7-year rule.
Some debts have a reporting period longer than 7 years, including:
- Tax liens: 10 years if unpaid, or 7 years from the payment date
- Bankruptcy: 10 years from the date of filing (15 U.S.C. §1681c)
- Perkins student loans: Until paid in full (20 U.S.C. §1087cc(c)(3))
- Direct and FFEL loans: 7 years from default or rehabilitation date (20 U.S.C. §1080a(f)(1) and 20 U.S.C. §1087e(a)(1))
- Judgments: 7 years or the debtor’s state statute of limitations on judgments, whichever is longer
The FCRA 7-year rule is separate from state statutes of limitations for debt issues.
Learn the lifespan of a judgment in your state at the Bills.com Statute of Limitations Laws by State page.
The start of the 7-year period begins at the date of first delinquency, or if no payments are made, when the first payment was due. Review your credit report carefully to make certain the dates of first delinquency are reported correctly. Unscrupulous collection agents reset the date of first delinquency to stretch out how long a derogatory account appears on consumer’s credit report. This is illegal under the FCRA.
Just because a debt does not appear on a credit report does not mean the statute of limitations for the debt has passed. The opposite is also true: The passing of a state statute of limitations on a debt does not mean the debt may not appear on a credit report. The federal FCRA and state statutes of limitations are separate and independent of each other.
Whether a debt appears on a credit report does not establish legal liability for the debt. The opposite is also true: You may have legal liability for a debt not reported to the credit reporting agencies. Credit reports are not legal records of every debt a person owes.
If you find charged-off accounts appearing on your credit report after seven years, you may want to dispute the incorrect listings with the credit bureaus.
Some creditors, especially debt purchasing firms, will report inaccurate charge-off dates to extend the amount of time an old account appears on your credit report. If you find any inaccurate information, you should dispute the credit report listing with the bureau in question. See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information.
The 7-year rule only applies to derogatory items, not to accounts that you are keeping current, or which you closed in good standing. As long as an account is not considered derogatory, it can remain on your credit report indefinitely. In fact, even accounts that are no longer reporting to the credit bureaus may continue to appear on your report as long as the account is not a derogatory item. It is common to see positive items that are more than 20 years old appearing on a credit report.
Resolving the Debt
As discussed above, the fact that the debt is charged-off does not mean the debt is forgiven or canceled. Your credit report should not be your primary concern. To learn more about your rights and liabilities in the collections process, see Collections Advice. I also recommend you read What Are My Debt Resolution Options?
I hope this information helps you Find. Learn & Save.
Best,
Bill
Debary, FL | February 24, 2013
February 24, 2013
The debts you mentioned are not extinguished, canceled, or forgiven. However, as mentioned, they may not be reported after 7 years. If the original creditor or their collection agents have not pursued you for the debts so far, then you it is unlikely they will do so in the future. In this case, I would follow the cliche, "Let sleeping dogs lie."
Portland, OR | January 19, 2013
January 23, 2013
Let's assume the answers to both of these questions are yes. The Fair Credit Reporting Act allows you to dispute inaccurate items appearing in your credit reports at the big-three consumer credit reporting agencies — Equifax, Experian, and TransUnion. If you made the payments as agreed, then the account should not appear as delinquent or a charge off.
If the answer to one or both of my questions is no, then you do not have a basis to dispute what appears on your credit report.
You asked if you need to worry about someone pursuing you for the deficiency balance. Original creditors of deficiency balances oftentimes sell these collection accounts to collection agents for pennies on the dollar. How aggressive a collection agent will pursue you depends entirely on the collection agent and its policies — there is no rhyme or reason to which debtors collection agents pick for collections.
Davie, FL | October 25, 2012
Union City, CA | September 25, 2012
September 25, 2012
August 30, 2012
Corinth, VT | July 21, 2012
July 22, 2012
The statute of limitations is a separate issue, The SOL may, protect you in case of a law suit. In most states a creditor can sue you even if the SOL has expired. You need to make an affirmative defense. If you get a court summons do not neglect to answer it. A court judgment can lead to wage garnishments, bank levies and liens on your personal property. The public judgment would also appear for on your credit report for a 10 year period.
Remember that SOL issues can be quite tricky. Where you currently reside and when you moved there can certainly affect the expiration of the SOL.
Philadelphia, PA | July 11, 2012
July 11, 2012
In the accounting world, there is no difference between "charge-off" and "final charge-off."
Philadelphia, PA | July 11, 2012
Philadelphia, PA | July 11, 2012
July 11, 2012
July 11, 2012
The rules for credit reports are federal, and can be found in the Fair Credit Reporting Act. The FCRA sets the rules credit reporting agencies, such as Experian, Equifax, and TransUnion, must follow. The FCRA uses the "date of first delinquency" phrase you mentioned. The date of first delinquency starts the clock for the 7½-year rule mentioned in the FCRA. The 7½-year rule sets how long the credit reporting agencies may report most derogatory entries on a consumer's credit report.
The 7½-year rule for credit reports is separate and independent from each state's statute of limitations rules. For example, a derogatory item appearing on a credit report may be older than the consumer's state statute of limitations for debt. Conversely, a debt may fall off of a credit report after 7½ years, but still be within a state's statute of limitations. That is what I mean when I write the 7½-year rule and each state's statute of limitations for a breach of contract are separate from each other.
Philadelphia, PA | July 12, 2012
Framingham, MA | June 21, 2012
June 21, 2012
Any other adverse item of information, other than records of convictions of crimes which antedates the report by more than seven years.
My advice? Validate the debt. A debt that cannot be validated may not be collected. If the collection agent validates the debt, then send it a cease communications notice.
Framingham, MA | June 22, 2012
June 22, 2012
Are the tax bills the result of a civil suit, civil judgment, or an arrest? If so, these can appear for seven years or the governing statute of limitations, whichever is longer.
Any other adverse item of information, aside from a criminal conviction, can appear on a credit report for no more than seven years from the date of first delinquency.
Boston, MA | June 10, 2012
June 12, 2012
January 11, 2012
January 11, 2012
Concentrate your efforts on improving your credit score.
January 12, 2012
January 12, 2012
Back to your original question. According to the facts you shared, Capitol One promised one thing, but did something else. Specifically, in exchange for you paying Capitol One a settlement amount, it promised to notate your account in a certain manner, which it did not. You may have a breach of contract case against Capitol One. Consult with a lawyer in your state who has consumer law experience to learn more about your rights.
Loading more commentsSince you don't have facebook, please provide us with your location and a valid email address so we can answer it. Without a valid email address,we can't reply. (Go back to login with Facebook)
Due to the high volume of comments received, we cannot publish and/or respond to every comment received. If you have a specific question, we recommend you search our site for an answer before commenting.
* Bills.com will not share, sell, lend, or make public your e-mail address. We reserve the right to delete any questions or comments that violate the Bills.com terms of service.
We get a lot of comments! Before commenting, we ask you to do 2 things:
Log in
Like us
Submit your comment!
Due to the high volume of comments received, we cannot publish and/or respond to every comment received. If you have a specific question, we recommend you search our site for an answer before commenting.
* Bills.com will not share, sell, lend, or make public your e-mail address. We reserve the right to delete any questions or comments that violate the Bills.com terms of service.
Thank you for your comment. Your comment will be posted shortly.
Comments (62)