Debt is something that haunts many individuals around the world. Because they are able to easily acquire credit cards, loans, and other forms of credit, it is not that hard to be in it. When things change financially, that debt can become a rather significant issue. If you have been in debt and it has hurt you in some way, you may be wondering how long it will leave a nasty mark on your credit file. This brings about a good question and the question is whether or not debt has an expiration date?
The answer is that it does, but only if you take court action. The law says that there is a limitation of two years from the date the last payment or acknowledgment by the debtor regarding the existence of the debt by which the creditor cannot take legal action or sue the debtor in order to obtain the money for the debt. British Columbia is the only province this rule does not apply to. Unfortunately, this does not mean you can be worry-free regarding that debt.
Statute Of Limitations
The statute of limitations is a good way to defend yourself against legal action, but it does not get rid of the debt. The creditors can continue their collections efforts for as long as they need to. In other words, the collections efforts can last more than two years after the missed payment.
When a collections agency takes on collection of the debt, they get paid a commission based on how much is paid by the debtor. This is why it is their goal to continue to harass people toward repayment of the debt. If they reduce the amount of the debt through a settlement, they reduce their commission.
The only way to stop the harassing phone calls is to eliminate the debt by filing a consumer proposal, filing bankruptcy, or paying it in full. The consumer proposal is simply a proposal from a credit counseling or settlement company on your behalf. This is a way in which you can pay the debt off faster as well because interest stops accruing and fees can be removed.
Re-aging The Debt
Once the two-year statute of limitations is over, you will need to be careful about making a payment. If you do make a payment, you have re-aged the account and that means the collector has the right to sue for the payment. In other words, the clock starts over. Here is an example of this: If you decide to make a payment on the debt 10 years after making the last payment, the two-year time frame starts over and that means the creditor can take the legal action that they did not take the first time. Even a payment of $1 can restart the clock. There is also the fact that the credit bureau only reports the debt six years after the last payment was made.
It may not be easy to pay the debt, but the solution to avoiding being sued and having a debt follow you for many years to come is to pay it down. Ignoring it and hoping it will go away is not something that is advisable because the creditors will keep pushing until they get their money or you go bankrupt.
If you decide to go bankrupt, that will eliminate the debt as long as it qualifies for discharge. However, bankruptcy does have its own set of consequences when it comes to what it will do to your credit. The good news is that it can give you a fresh start. Yes, it can be difficult to start all over again with your credit when it took you so long to build it to begin with, but, depending on your financial situation, it may be an alternative to ignoring your debt that will allow you to be able to obtain quality credit again.
As it stands, having a collection on your credit file can have a negative impact on your credit score. This negative impact can keep you from being able to acquire credit. Depending on the lender, you might be charged a higher interest rate or the lender may decide to not extend credit out to you at all.
On another note, it is not impossible to pay the money you owe right now. You can talk to the debt collector and propose an alternate way to pay the debt. For instance, you could make an offer to make two or three payments versus trying to pay the entire amount at once.
Other tips to keep in mind include: never send cash to a collections agency, make sure you always receive a receipt for the payments that you make, and only work with a collector when they have requested payment from you. If the collector is a collections agency, they now own the debt. This means you cannot contact the original creditor to remit payment or send payment to the original creditor. If you do that, there could be a lot of confusion.
Lastly, keep in mind that you could be contacted by a collector that works for a company other than the one the money is owed to. If that happens, the creditor has hired a debt collection agency to get the money that they are owed. Other than the payment stubs on correspondence, it can be confusing knowing who to pay. If you do not have any correspondence from the collector, ask them to mail you something so you know where to remit payment to.
Although it may bring you some peace of mind that you cannot be sued after two years of non-payment, know that the debt will still haunt you. That is why it is important to explore all of your options so that you do not have creditors harassing you for years to come.