Advice on Collections Notice for an Old Deficiency Balance

What they are attempting to collect on, is called a deficiency balance, which is typical after a repo when you still owe money on it. If the creditor wishes to take legal action against you to attempt to collect on this deficiency balance, the creditor is required to file suit within a certain time period, referred to as the Statute of Limitations. Basically, a statute of limitations (SOL) is the time period during which a creditor can take legal action (i.e., sue you) to enforce a debt. Each state has defined its own statutes of limitations, and they vary significantly from state to state. For example, in California, creditors have four years to sue you to enforce a debt, while in Rhode Island they have 10 years. To learn more about statutes of limitations for the collection of debts, I encourage you to visit BCSAlliance.com.

If you determine that your state's SOL for the collection of debts has expired, it is relatively unlikely that the creditor will attempt to sue you to enforce the debt. 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 passed, the judge should dismiss the case. In addition, if the court believes that the creditor filed suit despite knowing that the SOL had expired, the court may sanction the creditor for its actions. 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 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. 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.

By federal law, all debts must be removed from a credit report after seven years (US Code Title 15, §1681c) and bankruptcies after ten. Remember that just because a debt is removed from a credit report that does not mean the statute of limitations has passed. Federal credit report laws and a state statute of limitations laws are separate and independent from each other. If your state's SOL is five years, an account can appear on your credit report for 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, you should dispute the listings with the credit bureaus.

See the Federal Trade Commission document FTC Facts for Consumers: How to Dispute Credit Report Errors for more information. To find out more about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com Credit Resources page.

For further information regarding options available to consumers struggling with debt, I invite you to visit the Bills.com Debt Help page. You may not need assistance with your debt if the statute of limitations has expired, though it is helpful to know what options are available to you.

I wish you the best of luck in resolving your debts, and hope the information I have provided will help you Find. Learn. Save.

Best,

Bill

www.Bills.com