The period during which your name is flagged as under debt review is directly tied to the length of your debt review process. Typically, this process can span anywhere from 36 to 60 months, depending on the amount of debt and the repayment plan agreed upon.
Most states or jurisdictions have statutes of limitations between three and six years for debts, but some may be longer. This may also vary depending, for instance, on the: Type of debt. State where you live.
The process can last for just a few months, or up to 60 months. Alternatively, if you're no longer over-indebted, there is no court order in place and you can resume normal repayments, we can begin the debt review removal process for you by applying for an order to rescind your debt review status.
The bottom line. While debt collectors may not automatically sue over a $3,000 credit card debt, they have the right to pursue legal action if they believe it's a viable option.
Debt collectors are not permitted to try to publicly shame you into paying money that you may or may not owe. In fact, they're not even allowed to contact you by postcard. They cannot publish the names of people who owe money. They can't even discuss the matter with anyone other than you, your spouse, or your attorney.
Smaller debts, usually under $500, are less likely to lead to a lawsuit. However, if the debt is part of a larger collection portfolio, agencies might decide to pursue it, especially if they can consolidate multiple small debts into a single legal action.
If the consumer wishes to cancel the debt review, the debt counsellor cannot remove the flag unless all debts are paid. However, the consumer can approach the Magistrate's Court to have the flag removed.
In general, most debt will fall off your credit report after seven years, but some types of debt can stay for up to 10 years or even indefinitely. Certain types of debt or derogatory marks, such as tax liens and paid medical debt collections, will not typically show up on your credit report.
Pay more than the minimum amount due
The best way to get out of debt faster is to pay more than is expected every month. It's important to understand that your monthly instalment is made up of a principal and an interest component.
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
Even though your card issuer "writes off" the account, you're still responsible for paying the debt. Whether you repay the amount or not, the missed payments and the charge-off will appear on your credit reports for seven years and likely cause severe credit score damage.
Old (Time-Barred) Debts
In California, there is generally a four-year limit for filing a lawsuit to collect a debt based on a written agreement.
During this period, you could pay your creditors directly or use an intermediary called a payment distribution agent. The agent keeps track of how much you pay each creditor in line with your payment plan and sends you and your debt counsellor monthly statements.
Key takeaways
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
According to the Corporate Finance Institute, a specialised educational platform for finance professionals, long-term debt (LTD) is any amount of outstanding debt a company holds that has a maturity of 12 months or longer. If the loan repayment period is less than one year, it is considered short-term debt.
For most debts, the time limit is 6 years since you last wrote to them or made a payment. The time limit is longer for mortgage debts. If your home is repossessed and you still owe money on your mortgage, the time limit is 6 years for the interest on the mortgage and 12 years on the main amount.
However, disputing a debt also forces the collector to restart the clock on when they can sue you.
Your creditors will issue you with a Section 129 letter which confirms you are in arrears. This will be followed by a summons and if ignored leads to a default judgement. It is at this point that a warrant of execution is issued, and your car can be repossessed and sold at auction to cover some of your debt.
You will need to wait until your debt review period is over if you do decide to obtain a loan though. Reviewing your debts is a step toward financial freedom. You won't get any more unsolicited loan and credit card offers while under debt review.
The cost of removing a person from the debt review system varies depending on the amount of outstanding debt and credit providers involved. Generally, it can take between R1 000 and R30 000 to remove someone from the system including fees for legal advice or guidance in negotiating settlements with creditors.
The decision to sue often depends on the debt's size (usually a minimum of $1,000), age, and original agreements. Debt collection practices for unpaid credit card balances frequently lead to court cases. If sued and found liable, you may face additional costs through interest and fees.
A creditor can't file a lawsuit if it's been more than four years since the last activity on the account. This is called a statute of limitations. If you have not made a purchase on or made a payment to the credit card account for more than four years, that debt is considered expired.