Legitimate debts never disappear, although statute of limitations laws can make them much harder to collect. Credit-reporting laws limit the amount of time a debt can appear on standard credit reports, but if you owe a debt to a person or company, expect collection efforts to continue until you either pay or settle the debt.
Statute of Limitations Laws
There are limits on the length of time that a creditor has to sue you for a bad debt. Every state has its own statute of limitations laws that set this time frame. In some cases, the statute of limitations on debt vary according to the type of debt. For example, if your debt is secured by a written contract, a creditor may have a longer time in which to sue you. If the creditor does successfully sue you, a different statute of limitations goes into effect. The statute of limitations on collecting a judgment is often much longer than the statute of limitations on collecting other types of debt.
Credit bureaus are required by law to remove most types of negative information from your credit report after about seven years, although bankruptcies can be included on your report for up to 10 years. If you have an unpaid judgment, it can hang around your report for as long as the statute of limitations on judgment collections remains in effect. There is an exception to this rule, however; there are no restrictions on how long a credit bureau can report negative information if you apply for a large loan or a high salary job.
Even if the debt is no longer collectible under the statute of limitations, some potential creditors may insist that you pay off or settle a debt before they will grant you a loan. If you plan to borrow much money, such as for a mortgage, check your credit report for old, charged-off accounts, and be prepared to pay them off.
Bankruptcy is a drastic but highly efficient way of eliminating your responsibility for debts. Once the debt is discharged under bankruptcy, you no longer have an obligation to pay it. However, the debt can still appear on your credit report for as long as is permitted by law.
Some unscrupulous debt collectors buy up old and legally noncollectable debt in hopes that they can get you to pay. These collection agencies attempt to intimidate you into paying the debt, whether or not you are legally obligated to do so. In rare cases, they may even illegally place the debt on your credit report or attempt to sue you. Do not ignore their collection attempts. Instead, inform the debt collector in writing by way of certified mail that you are no longer obligated to pay the debt and that they are to stop contacting you.