By Odysseas Papadimitriou, CEO of Card Hub, a website dedicated to finding consumers payment options ranging from secured credit cards to the best credit card deals.
When you’re deep in credit card debt, it might seem as if everyone is after you, like everyone wants a piece of the money you just don’t have. However, what you do have are rights and options, though it might not seem like it when seemingly every time you answer the phone or open your mail a debt collector is waiting for you. So what are these rights and options and how can you use them to benefit your situation? Let’s find out.
The Statute of Limitations for Written Contracts
The statute of limitations for written contracts – such as credit card agreements – is the most important consideration in your battle with credit card debt. Like the statute of limitations for crimes, the statute for written contracts essentially dictates how long breach of a contract (e.g. not paying your credit card bill as agreed) is pertinent legally. Therefore, understanding it is the first step to deciding how to handle your debt.
Once the statute of limitations runs out on your debt, you are no longer legally responsible to pay it. In other words, while a lawsuit may be brought against what’s known as time-barred debt, as long as you make it clear that the statute of limitations has concluded, that suit will be dismissed. But how do you determine the age of your debt and how it relates to the relevant statute of limitations?
First, your debt’s age depends on when you last made a payment toward it. The clock starts to run when you make a payment and resets with each subsequent payment you make. Second, the statute of limitations for written contracts varies by state and ranges anywhere from 3-15 years. Thus, depending on your state, waiting out the statute of limitations might not be a viable option.
Your Options
Without a doubt, reaching a mutually beneficial deal with your creditor or whoever has assumed your debt is your best option. The type of deal you’re looking for both removes the possibility of a lawsuit (as long as you meet the terms of your agreement) and provides you with a clear line of sight to the time when you have no more obligation to your creditor. Two of the most common such agreements are referred to as “debt settlement plans” and “debt management plans.”
Debt settlement involves your creditor agreeing to forgive a portion of your debt in return for you paying down the rest of it in one lump-sum payment. If you have the available cash, this is a great option because it gets you debt free as quickly as possible. Note, however, that you’ll likely have to pay taxes on the forgiven amount because it technically becomes earnings.
Debt management is when you set up a revised payment plan with your creditor, often allowing you to make lesser monthly payments. Make sure you can comfortably make the payments established by any potential new agreement, however, because your creditor is unlikely to have much patience with an inability to do so.
If you can’t come to an agreement that you can afford based on your income and that satisfies your creditor, wait out the statute of limitations. Keep in mind that affording something doesn’t mean being able to pay for it while maintaining your current lifestyle. If you get taken to court, a judge will weigh your total assets and those obligations which are necessary simply to get by. Therefore, while you might have to forgo some perks and frills to reach an agreement with your creditor, at least you won’t be on the wrong side of a lawsuit.
Your Debt Collections Rights
While they might act like it, debt collectors can’t do whatever they want. In fact, they’re governed by a uniform set of rules. And though they’re too many in number to touch on each here, below is a list of the most important rights consumers have when dealing with debt collectors.
Debt collectors…
• may only call you between 8 a.m. and 9 p.m.
• may not use the telephone to intentionally annoy or harass you
• may not contact you after you have requested in writing that they not do so
• may not misrepresent themselves or the extent of your debt
• may not threaten legal action that is not actually being contemplated
• may not share information about your debt with third parties, excluding attorneys and your spouse
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