Three Top Debt Collection Myths

Did you know that the Statue of Limitations (S.O.L) limits the amount of time that the Original Creditor or Debt Collector can legally get a Judgment against a Debtor in Court?


After the Debt has passed the S.O.L. for collection, it is known as a "Time-Barred Debt".

But there are three myths that need to be destroyed.

Myth #1: True or False? Once the SOL has passed, the Debt Collector cannot pursue you.

Answer: False. They can and sometimes do collect. It depends on how weak they think you are.

Melinda and I were discussing a collection notice for defaulted home security contract that she had co-signed for her adult daughters security. The daughter was laid-off and couldn't make the Mortgage let alone pay the security contract. But the debt was years old and has passed the SOL for Judgment.

Melinda was not a weak woman. She handed me the collection notice and asked me, "so why do they keep calling me?

I inspected the collection notice and pointed out to her that it wasn't the "Original Creditor" (the Security Company). A 3rd Party Debt Collector had the account. Not good news.

Melinda, said "hold on, that account is too old to be collected on. I responded "you're almost right". The debt collector can not demand that the Court order a Judgment in their favor. But they can still attempt to collect the debt".

Myth #2: True or False?: The SOL Clock Starts Ticking on your day of last payment.

Answer: False. There are two types of of "Actions" that start the SOL Clock for legal action.

1. "[First] Cause of Action States": Are U.S. States where your "First Delinquency" will start the SOL Clock. This means the SOL Clock starts ticking after you miss a payment.

2. "[Last] Breach of Action States": Are U.S. States where the Last Breach of Action will start the the SOL Clock. A Last Breach of Action is based on when the account was open and in good standing or the date of last payment before the finances hit the fan.

Myth #3: True or False? If a Debt is not time-barred there is no defense against a Summons to Court.

Answer: False: There are many rights and resources that the Federal Government provides to help you win your war on debt. The one this post is based on is:
http://www.fdic.gov/regulations/laws/rules/5000-1000.html



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