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After 7 Years Is Debt Erased?

After 7 Years Is Debt Erased?“After 7 Years Is Debt Erased?” is a question I get too often in the mail.

Unfortunately, the answer is NO. Debts never go away. People simply confuse Statute Of Limitations (SOL) with Credit Reporting Time Frame, two completely separate notions.

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 credit reporting time limit defines only the allowed time frame for reporting debts, and has nothing to do with your liability towards your debts.

Per the FCRA, most negative information can be reported to your credit report for a maximum of 7 years (some exceptions apply) from the date of first delinquency – paid or not. Even debts which have been paid in full continue to appear on your credit report for the full time limit!

After the defined reporting time has elapsed, negative information ages off your credit report whether paid or not.

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

For a complete list of the reporting time frame see ../how-long-do-negative-items-stay-on-my-credit-report/.





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.

The Statute of Limitations also has nothing to do with your liability to pay off your debts, and debts are NOT erased even after the SOL has elapsed. It only means that you can use the SOL as an affirmative defense in court if you’re sued for a debt,

The Statute of Limitations clock starts from the date of last activity and restarts every time someone does something about the debt!

Making a payment, making a promise of payment, confirming your debt, negotiating a settlement or entering a payment agreement can restart the SOL on an account to zero, no matter how much time had elapsed before the activity. Even 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, paid or unpaid.
  • Debts become time bared after the SOL.
  • When sued after the SOL elapsed, you can sometimes use it as an affirmative defense in court.