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How long before debt falls off your credit report?

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Posted at 3:36 PM, Mar 08, 2018
and last updated 2018-03-08 18:36:05-05

This article is written by Peters and Associates.

 

Thanks for the submission, Jeff. Like most things involving law and contracts, it depends.

Generally speaking, debt on delinquent non-government accounts will fall off your credit report seven years, six months and one day from the date of first delinquency. There are quite a few people who believe it’s exactly seven years, but the Fair Credit Reporting Act states that the seven-year running period begins “upon the expiration of the 180-day period beginning on the date of the commencement of the delinquency which immediately preceded the collection activity,” which is where the additional six months comes into play.

Included in these rules are first and second mortgages, auto loans, credit-card debt and most medical bills.

It’s also important to note, however, there are a few exceptions to these rules. The one that crops up most is “a credit transaction involving, or which may reasonably be expected to involve, a principal amount of $150,000 or more.” This may include mortgage balances that are higher than that value. In those cases, the items may remain longer than 7.5 years and may even remain until the debt is lawfully reduced to a zero balance.

Please note: The above information applies to revolving/installment accounts only and does not apply to judgments, bankruptcies or other public records, which all have specialized reporting rules.

How long does a creditor have to sue you for a debt?

The time period is limited by written laws called statutes of limitations, which vary by state. You can find most of Nevada’s statutes of limitations in Nevada Revised Statutes (NRS).

Under NRS 11.190, most creditors have six years to sue you from the time you breached the contract by not paying (that time limit generally applies to the auto loans and medical debt). For credit-card debt, creditors have four years from the date of breach to sue.

Real estate, however, is handled differently. The above statutes specifically do not apply to real property. Foreclosure, short sale and deed-in-lieu statutes are defined in other sections of the NRS and may vary based on date of action, owner occupancy (primary residence), promissory note conversion, position of the lien, etc. Unfortunately, the complexity means I can’t give a blanket statute of limitation that applies to all properties.

Please note, however, a statute of limitations does not stop a creditor from suing you. Rather, the statute of limitations is a defense you must assert when defending a lawsuit. In addition, some creditors try to collect debts by calling you, sending letters, etc., well after statutes of limitations have expired. Try Googling “zombie debt,” which likely will be the subject of a future article.

A word of caution: Certain debt collectors may try to trick you by having you say something, sign something or even getting you to make a small payment to “stop the collection calls.” If you fall for these tricks, you may accidentally reset the Fair Credit Reporting Act delinquency date or statute of limitations breach date.

As always, the most important aspect of any legal decision, including those about whether to pay old debts, settle them or file bankruptcy, is to consult with and/or hire the best lawyer possible.

Great questions, Jeff! Thanks for writing in!

If you have a question you’d like to see answered by an attorney in a future issue, please write to us at questions@PandALawFirm.com

Please note: The information in this column is intended for general purposes only and is not to be considered legal or professional advice of any kind. You should seek advice that is specific to your problem before taking or refraining from any action and should not rely on the information in this column.