Whether it is for obtaining a loan or for the collection of the dues in case of default, the laws that govern the lending market will have a considerable effect. There have been a lot of changes in these laws over the years and the old concept of a debt being written off after seven years have also been restricted to specific situations only.
Considering the perspective of the creditors and the debt collection agencies the new laws also have made some dramatic effects on the age old practices.
Therefore, there is no reason to celebrate when your debt crosses the specific statute of limitations, or when you file for bankruptcy. The new laws also govern this aspect when a debtor dies. The new laws and the statute of limitations also time bars the collection agencies from filing any lawsuit.
However, these rules may work differently in different situations and for different parties more than you can imagine. It is these aspects that you need to know to be better off when you take on a loan from any traditional bank, any other financial institutions or any other private money lending sources such as https://www.libertylending.com/ or any other.
The features of the law
The laws that govern loans are varied and all are aimed to protect the consumers primarily but the creditors aspects are not overlooked altogether. The different features of the law are:
- As far as bankruptcy is concerned you will get a fresh start along with an extra breathing room. However, when you file for Chapter 7 or Chapter 13 bankruptcy the consequences can be different and varied.
- As far as death of a debtor is concerned, the law does not eliminate the obligation of the debtor who is a spouse or a parent does. However, in these cases it is the law of the state that will determine the end result of the insolvent estates.
- As far as the statute of limitations is concerned which is the time limit within which the debtor or the creditor has to take legal action to collect the outstanding loan amounts it may vary according to the law of the state that you live in and also on the ways you respond when any debt collection agency contacts you for collection of the debt.
It is the start date that is important. As for debt collections this statute of limitations is actually the date when you paid for the last time. The clock starts ticking when you paid for the last time but the SOL also creates an opportunity for you as the consumer to accidentally reset the clock when it comes to the vital legal protection against the lawsuits.
The rules for the statute of limitation are unique for each state and involve the following:
- If you make any payment in between it will reset the clock and revive the SOL
- It involves negotiating for new payment plans
- It is also affected when you opt for a debt consolidation program
- It changes when you acknowledge that you owe the debt
- It will also change when you fight for the surprising balance bills and
- It will also be reset when you request for a financial assistance.
It is for this reason that you should consult an attorney in your state for any legal advice required and to know how to go about as well as the ways to avoid restarting the statute of limitation.
Statutes of limitations vary
Statutes of limitations not only vary by the state where the debtor resides but also by the type of the contract. Typically, most loans will have a written contract and when it comes to medical debts there is a medical patient financial responsibility form that you may need to sign that will serve as the written contract. There are different forms of such contracts for any type of loan such as:
- Oral contracts: These are verbal agreement between the debtor and the creditor to pay back the money due
- Written contracts: This is an official document that is signed by the debtor while taking the loan indicating that all terms and conditions included are well understood and accepted
- Promissory notes: These are also written agreements that mention the specific rate of interest as well as the timeframe of the loan and
- Open-ended contracts: These contracts have a revolving balance that the debtors can repay and borrow again.
Depending on the types and terms and conditions of the contract you will know the timer that the debt collector rightfully has to pursue any old debt. It is important for you to remember at this point this legal right of the collector does get extinguished even after the expiry of the obligations after it expires. The creditor as well as the debt collection agency is time barred from filing any lawsuit against the debtor to force for a payment.
However, all these do not take away the fact that you still owe the money to the creditor or the collection agencies. The law also gives them the right to attempt to collect debt indefinitely until it is discharged through bankruptcy.
When the statute of limitation runs out there is only one less tool in the kitty of the debt collector as they cannot take you to the court anymore to force you to make the payment but they may have another trick up their sleeve which is even far more dangerous. They may report to the credit bureaus about the amount that you owe to them. The credit reporting agencies will enter this fact in your credit history after proper inquiry into the matter and such report will stay there for a long, long time. This will in turn affect your credit score and credit history thereby restricting your borrowing power in the future.
Therefore, to sum up it can be said that the statute of limitations has a lot of potential to either help you with the debt management or affect your credit report.