By Sean A. Kelly
While the wisest thing to do when dealing with credit card debt, or any other debts, is to pay on time and never overextend it, some people really do not have the option or the luxury to do so. When money is tight and creditors are calling you from every corner, some debts are bound to be left unpaid. The usual policy of the creditors when a debtor has not been paid from 180 days to 240 days is to charge off the debt. No, this does not mean that the debt has been cancelled or that the debtor no longer has to repay it. It simply means that the creditor has moved that debt account to a bad debt account. The creditor still has the right to collect the debt from you while some other creditors might sell that account to a collection agency at a discount rate.
If in any case your creditor or the collection agency calls you up for collection, the first thing you need to know is your rights. In the United States, the creditors or debt collectors are bound by the state’s Statute of Limitations. This law sets forth a maximum time after which a creditor or debt collector can no longer recover the debt from you, the debtor. The laws of the statute vary in each state so you may like to find out the limitations for your state. If a creditor demands payment or files a lawsuit after the allowed time, you can raise the issue of expired statute limitations. However, be reminded that you are usually required to raise the issue in written response to the collection demand or lawsuit. The court will then likely dismiss the case and disallow the creditor to file suit again. This also means that you are, legally, not bound to the old debt anymore.
Aside from the statute, a creditor or debt collector is also bound by the contract between you and your original creditor. So if the initial contract did not stipulate interest charges but the current collector demands full payment plus interest, you have no obligations to agree to it. With the average person having at least two credit cards nowadays, it is difficult to remember the terms of your old credit card debts, or your old debts outstanding if any. This is why you are advised to ask for debt validation when the collector demands payment. In the time between the notifications for a debt validation till the time it is presented to you, the collector has to cease collection from you. If the collector fails to present the debt validation, then the account becomes non-collectable and he has no right to collect from you anymore. Be sure that you are presented with proper validation, that is the account statements from the original creditor which includes payment history from the very beginning as well as the copy of the loan or credit card application.
These are some means to protect yourself against old debts when they come knocking on your door. But what if they are current debts and you are unable to pay them off? The solution can come in form of credit card debt consolidation. This means merging your various credit debts into one new repayment plan; your various monthly payments will be lumped into new payment plan. This is often an advisable alternative for paying credit card debts. It will usually result in easier repayment and lower interest rate too. Sometimes a consolidation involves a secured loan against an asset, like your house, as collateral. But it isn’t always necessary to mortgage you home though – personal loan or unsecured loan is sufficient for consolidation, although it may come with a higher interest rate as compared to a secured loan.
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