By Audrey Throne
Dealing with debt collectors can be a daunting experience, especially when you least expect them to contact you. Common emotional effects include significant stress and guilt. However, before you go ahead and pay anything back to the debt collector, it is vital to be mindful of your rights.
Debt collectors use a range of tactics to extract a payment from a debtor. Just because they build a sense of fake urgency, that doesn’t mean you should go ahead and pay any amount right away. If you have the right information, you will be able to understand when debt collectors give up on a specific account.
Perhaps your debt collector stopped calling you for a few days, but that doesn’t necessarily mean that his efforts are over. They can take legal action against you, resulting in need of hiring an attorney. Let’s learn more about this situation.
The U.S. national debt hit $22 trillion in 2018. In the same period, the country also had a $65,600 national debt per capita. With such high debts, it is not surprising that numerous individuals find themselves unable to repay their dues on time. These individuals are non-paying debtors.
Often third-party companies are hired by businesses to recover their debts from such non-paying debtors. These companies are known as debt collection companies, and they are usually use specific tactics to collect the debt as soon as possible. They create a sense of urgency and threaten you to either pay or face the consequences.
While a debtor can’t do much about his creditor, he may ask third-party collection agencies to cease communications. To do so, debtors send a written cease and desist letter to the agency and ask them to stop calling. However, it is still obligatory to either pay the dues, get the loan forgiven or get the debts discharged in bankruptcy
The Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act or the FDCPA was passed in 1977. It protects the rights of debtors from unfair techniques of debt collection.
A debt collection agency cannot:
- claim you will be arrested;
- seize or garnish your property and wages unless they both intend to and are permitted to take such action in court;
- threaten to cause violence or harm;
- use obscene language;
- call you repetitively at work after you ask them not to.
Statute of Limitations
Even if a debt is charged off by the creditor, you still owe it, and it is collectible if it is within the statute of limitations. A statute prescribes a period in which the creditor may initiate legal proceedings from the date of an alleged offense.
While the statute of limitations can differ from state to state, they generally fall in the range of three-six years. However, some jurisdictions may extend the duration for particular types of debts. In Texas, the statute of limitations is four years. Creditors or collection agencies cannot legally pursue you once this period passes.
Let’s imagine there is a creditor from Plano, Texas. Firstly, this creditor strives to recover the past due to commercial debts himself. Then he considers hiring a debt collection agency in Plano. He needs to legally act before the expiry of the statutes of limitations in his state. Generally, the more aged this debt is, the more difficult it will be to recover. If the statute of limitations expires, the creditor cannot even threaten the debtor of legal repercussions.
The last activity on the account is considered as the starting point for the statute of limitations. Even a partial payment on the debt may restart this period. Most people do not even partially pay as there’s no immediate benefit for paying off the debt.
After the statute of limitations, the debt is no longer legally enforceable so creditors or debtors cannot sue you. However, that doesn’t mean that the debt has been taken care of completely.
There is no saving your credit score even if the statute of limitations has passed.
The credit reporting time limit is usually seven years. However, specific types of debt may have a longer such reporting limit. After this limit, outdated information ceases to be a part of your credit report. No need to think you can relax if this happens. Even if the credit reporting time limit expires, that doesn’t mean you no longer owe a debt.
For specific sorts of debts, the statute of limitations may even exceed the credit reporting limit. You are legally liable to settle the debt in some way or the other. Otherwise, the creditor can use legal channels to recover the amount from you.
A debt past its due date is either charged off, paid back or forgiven. In all these situations, the credit score is affected negatively. A creditor or bank collection agency will keep reporting the debt to a credit bureau until the credit reporting time limit hasn’t passed.
If a debt collector is bothering you to make an instant payment, you should validate the debt. Not everything they say is truthful. Having proper information about the statute of limitations and credit reporting limit will help you deal with the agency in a better manner. Once the statute of limitations approaches expiry, the creditor or his representatives cannot take legal action against you. Even if that happens, you are liable to settle the debt, and the creditor and agency’s collection efforts will continue. However, you won’t have to pay as urgently as the collector wants you to do so.
Audrey Throne is the mother of a 3-year old and a professional blogger by choice. Throne is passionate about lifestyle, business, automotive, technology and management and blogs frequently on these topics. Find her on Twitter: @audrey_throne
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