Understanding the Statute of Limitations and Consumer Debt

The typical American consumer carries a fair burden of secured as well as unsecured consumer debt. These accounts usually refer to credit cards, personal loan, store credit accounts, and also car loans as well as home loans. It is not surprising that the recent economic downturn has seen an increase in loans which are progressively falling behind or are being defaulted on altogether. Consumers may even attempt to rely on credit card accounts to withdraw cash and then turn around and use it to pay off other creditor accounts or simply contribute to their monthly variable expenses.

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When consumers are finally attempting to dig their way out of the credit mess into which they slowly became immersed, they are frequently looking to credit repair agencies in an effort to raise their credit rating and once again qualify for good interest rates. While it is true that some credit repair agencies will make promises that are not possible to keep, the vast majority of reputable companies will advise their clients to be well aware of the statute of limitations that is attached to their debts. The statute of limitations, of course, is the amount of time that the law allows a creditor to come after a consumer for a debt.

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The statute of limitations may be tricky for consumers to understand, especially since it is not a federal statute, but actually a state law. As such, it varies anywhere from three to six years for unsecured loans, and up to 15 years for secured credit. Generally speaking, the statute of limitations starts on the date the last payment on an installment loan was made. Once the cut off time is reached, the creditor can no longer take legal action to recover any unpaid amounts due. On the flipside, if a consumer makes a payment in an effort to pay down some of the mounting debt she or he left behind, the statute of limitations starts all over again.

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It is tempting to simply disregard the statute of limitations – once it is reached – and forget about the debt. What needs to be remembered, however, is the fact that this bad debt is still owed, even if it falls outside the statute of limitations. For the sake of credit repair, however, knowing about the various time limits is a worthwhile endeavor, especially since it aides the consumer in ascertaining the order of importance that their debts take. Choosing to pay off those debts that are still well within the statute of limitations -- while saving those that have fallen outside this statute until last -- enables a consumer to get a fresh start with their credit profile.

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A skilled credit repair consumer advocacy group has the knowledge and ability to take a close look not only at the face value of the outstanding debts a consumer presents, but also suggest steps to clean up the credit profile. While this takes time, it is well worth the extra effort to get a fresh head start without necessarily having to file for bankruptcy or making financial promises that are hard to keep.

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