Which Statute of Limitation Applies?

Statute of limitations questions are the bane of civil procedure teachers and students in every US law school. They seem designed to ensure the full employment of attorneys.

There are few fast rules for statute of limitations issues. In general (mark those words) in a credit card debt situation, the debtor's state of residence is significant and controls which statute of limitations apply. However, in your situation, the creditor may argue to a judge that because you resided in a state with a six-year statute of limitation when you incurred the debt, that state's rules should apply. However, your attorney will argue that the creditor had ample notice of your new residence, and in the interests of consistency and justice your new state's statute of limitations rules should apply.

I encourage you to consult with an attorney licensed to practice in your state 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. See also the Bills.com resource How to Tell Which Statute of Limitations Applies to Your Situation.

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, see the Bills.com Debt Self-Help Center.

Credit reports and SoLs

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 (FCRA).

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 FCRA Web site offers a helpful guide to disputing credit listings. To find out more about credit, credit scoring, and credit reports, I encourage you to visit the Bills.com credit resources page.

Credit reports and settling debt

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 creditorÂ’s reaction, and then increase your offer as you feel appropriate.

I would expect that a creditor with old debt will likely settle for 40% to 50% of the balance owed. See Debt Negotiation and Settlement Advice for tips and tactics when negotiating a debt settlement.

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 read this debt settlement article in Bills.com:

I hope this information helps you Find. Learn & Save.

Best,

Bill