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The 5 Mile Markers

Mile Marker 5: You Are NOT Served with a Lawsuit

You are almost at the end of the road! If you don't settle with a creditor and aren't taken to court, this is the stage at which most of your accounts should end up.

Once the statute of limitations has expired on your debt (remember this varies by state), the debt is essentially uncollectible. If you receive a lawsuit after the statute of limitations has expired, you only need to show the court a copy of your credit report (showing the date you stopped making payments) and your state's statute of limitations.

Technically, a debt collector can still try to collect on a time-barred debt, but they can't sue you over it. Since you can (if you haven't already) send debt collectors a Do-Not-Call letter, the only thing they can legally do with time-barred debts is send you letters.

In practice, if you are going to be sued by a creditor it is usually in the first 12-18 months, and the collection attempts usually die off well before the statute of limitations is reached.

Action Steps:
  1. Keep track of the date when the statute of limitations expires on your debt(s).
  2. Once that date arrives, CELEBRATE! Congratulate yourself for the patience and fortitude it took you to get there.
  3. Take the money in your settlement fund (if you haven't already) and pay down secured debts such as your car or mortgage, or invest it.
  4. Continue to repair your credit. Just because the statute of limitations has expired on your debt doesn't mean that it disappears from your credit report. Charge-offs and collection accounts can still report on your credit report for up to 7 years.
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