Before you should begin the debt settlement process, it’s very important to look at the statute of limitations for the debts you want to negotiate. Every state has different rules regarding when the Statute of Limitations will take effect. The time also depends on whether you have entered into an oral contract, a written contract, a promissory note, or an open-ended account (credit card debts belong in this category). Once the statute of limitations has expired, you can no longer be held liable for your debts.
The Statute of Limitations varies from state to state and they can run from as short as two years to as long as 15 years. Do not confuse the Statute of Limitations with the time when a derogatory item can stay on your credit report. The latter usually stays on your credit report for an average of seven years. But if the Statute of Limitations for your debt in your state is still enforced, the creditor can still go after you in court.
It’s very important that you check if the Statute of Limitations for your debt is still up before initiating the settlement process since you will not even need to settle if it has already expired. This should be the first step you must take especially when a debt collector incessantly calls and tells you that you have a debt from long-ago that you have to pay.
Note that although the expiration of your debt’s Statute of Limitations serves as your absolute defense in case the creditor sues, you will have to prove so in court. By presenting documents and other files to attest that indeed the debt should not anymore be collected, you avoid judgment. If you ignore the hearings and thus fail to present evidence, a judgment can be issued against you since you are deemed to have lost the case.
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In the event that a collector demands that you pay a debt you owed to a creditor, another important step you must take before proceeding with debt settlement is debt validation. This is a legal procedure wherein consumers ask the collection agency to prove that the debt exists, that it is still collectable, and that they are authorized to collect the debt in behalf of the original creditor.
To validate a debt, you should ask the collector to prove that the original creditor assigned or sold them the debt. That means that they should have a contract to show their agreement, otherwise, they are not legally bound to collect from you. In addition, you should also ask that they show you the statement of accounts from your original creditor, including a complete history of any payments you may have made to them. You may also want to request for a copy of the agreement you signed with the original creditor.
Debt validation is your right under the Fair Debt Collection Practices Act (FDCPA). In the event that a collection agency cannot prove that they have the right to collect from you, they are not allowed to contact you about the debt, much more collect it from you. They are also barred from reporting it to the credit bureaus since this is a violation of the Fair Credit Reporting Act (FCRA).
Remember that you do not need to pay to have your debt validated and the documents sent to you must show positive proof that you do owe the debt—a computer generated sheet that shows your loan is not sufficient to prove this fact.
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