It pays to do some collections research. The statue of limitations on debt put a limit on the length of time a collector can sue you. If you have a collection within the statue of limitations, and we have a concern, we will flag it and not verify it without discussing it with you.
How to Calculate Your Statue of Limitations
Statue of limitations is state and debt type specific. Debt types include open-ended accounts, written contracts, promissory notes, and oral agreements. The statue of limitations clock starts with the default date rather than the later charge-off or reporting date. Many states statue of limitations for open-ended accounts, such as credit card debt, is as short as three years, so the clock-start date may be quite helpful.
Which State Law to Use?
If you reside in a state other than where you lived when you entered into the debt, check both states statue of limitations. Collectors may apply the one they like best (the longer one!)
Poking the Bear
Many collectors treat verifications as a trigger to intensify their collection efforts or initiate a lawsuit. The age and amount of debt are usually considerations. Regardless of your opinion about the legitimacy of the collection, it is prudent to be clear on your rights before taking action.
A Caveat
Some collectors attempt to sue beyond the statue of limitations. Although your defense would prevail, no one needs the stress. One more reason to treat collections with caution. A little attention at the outset can turn a threat into an advantage.
Using Collection Research as Leverage
When a debt is beyond the statue of limitations, it is often very negotiable. You may need to press your point so the collector knows that you know, but an expired time limit should give you a significant edge in negotiation.