After 7 Years Debt Erased?

Does after 7 years debt erased? A question I get too often.

The answer is NO. Debts never go away. People simply confuse between Credit Reporting Time Frame and the Statute Of Limitations (SOL), which are completely different.

Credit Reporting Time Limit
The Fair Credit Reporting Act (FCRA) is a federal regulation that defines the time frame for reporting negative information to your credit report.

The reporting time limit has nothing to do with your liability towards your debts. It only defines the allowed time frame for reporting debts – paid or not. Even debts which have been paid in full continue to appear on your credit report for the full time limit!

Per the FCRA, most negative information can be reported to your credit report for a maximum of 7 years from the date of first delinquency (some exceptions apply).

The credit reporting time frame clock cannot be restarted, and after the defined reporting time has elapsed negative items fall off your credit report whether debts are paid or not. See this for a complete list of the reporting time frame.

Negative information effect on credit score diminishes with time. Up to 70% of your FICO score is determined by information (positive & negative) from the previous two years.

Statute Of Limitations
The Statute of Limitations (SOL) is the time frame to bring lawsuit. It is defined by state laws and varies between states.

Like the credit reporting time limit, the SOL has nothing to do with your liability to pay off your debts. Even after the SOL has passed, it doesn’t mean that debts are erased. It only means that you can use the SOL as an affirmative defense in court if you’re sued for a debt,

If you are sued after the SOL, you will need to show up and tell the judge that the debt is time barred as it’s beyond the SOL.

Unlike the Credit Reporting Timeframe clock, the SOL clock starts from the date of last activity or last payment and restarts every time someone does something about the debt. For example, if a collection agency contacts you to try to collect the debt and you say something like “I don’t have any money right now”, that could (in some states) restart the SOL clock!

Summery

• Debts are NOT erased after 7 years.
• Debts are NEVER erased.
• Debts appear on your credit report for 7 years, whether paid or not.
• Debts become time bared after the SOL.
• When sued after the SOL expired, you can sometimes use it as an affirmative defense in court.