Collection question

[gjmmgmnt]

I currently have an account that went into collections and is close to the 7 year statute. I am aware usually this account should drop off my credit after the 7 years. My question is that I'm still paying on this account monthly due to my employer will I still have to pay even if the account drops off? Will the account still reflect on my credit since I have set up payment arrangements? What usually happens in this situation? Any advice would be greatly appreciated.

[llecs]

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@gjmmgmnt wrote:
I currently have an account that went into collections and is close to the 7 year statute. I am aware usually this account should drop off my credit after the 7 years. My question is that I'm still paying on this account monthly due to my employer will I still have to pay even if the account drops off? Will the account still reflect on my credit since I have set up payment arrangements? What usually happens in this situation? Any advice would be greatly appreciated.

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There are two aspects to old debt that should be considered. The first is the 7 to 7.5 year credit reporting time period (CRTP). CRTP is set by federal law via the FCRA. The clock starts at the date of first delinquency of the debt (DOFD). This is when you first went late and never recovered.

The second to think about is the Statute of Limitations (SOL). SOL is the time frame a creditor has to sue you for the unpaid debt and has nothing to do with reporting. SOL generally runs between 3 and 15 years, depending on your state' s laws and the clock starts at DOFD. Each state has their own laws involving SOL and is based on the debt type. In some states, the SOL clock can stop for a period (like if you go to prison), or even restart. In some states, SOL can restart if you make a payment on the debt or even if you make a written promise to pay or a written acknowledgment of the debt.

In your example, even if it disappears from your CRs due to the 7-7.5 yr CRTP, your SOL could be restarting with each payment. Definitely check your state's laws.

[compassion101]

So if the DOFD is say, 6/05 and normally should drop off reporting on 12/12. But on 6/11 he makes an agreement with the CA to pay each month for 2 years. In 6/12 he defaults on that agreement, does it still fall off on 12/12 as scheduled? Does it matter if the agreement is in writing? 

[llecs]

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@compassion101 wrote:

So if the DOFD is say, 6/05 and normally should drop off reporting on 12/12. But on 6/11 he makes an agreement with the CA to pay each month for 2 years. In 6/12 he defaults on that agreement, does it still fall off on 12/12 as scheduled? Does it matter if the agreement is in writing? 

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If you have a CO or CA with a DOFD of 6/2005, that CO or CA must drop off by 12/2012 at the latest. IME, with the exception of one CO all of my baddies dropped by 7 yrs.

If you have a CO and/or CA with a DOFD of 6/2005, it must drop off by 12/2015 regardless of any status or payment arrangement made with that debt. It doesn't matter if it isn't paid, paid in installments during that time, paid in installments and the agreement was defaulted upon again, was agreed to be paid off in writing, or paid off, the TL must drop by 12/2012 no matter what. In short, the FCRA doesn't care if it is paid or not.

Now to confuse things a bit, IME, I had some COs report longer than the 7-7.5 yrs. YMMV on the creditor, some COs, if paid, will delete the negative references right at 7 years and the TL can report as a positive for approx. another 3 yrs or more. For example, I proposed to DW in 1997. I paid most all of the ring in cash but financed a few hundred on it via Zales. I wasn't credit savvy then and let the account lapse into a CO. In 2000, I owned up to my debts and PIF. Zales had still owned it.. Sometime in 2004, all of the negative references disappeared and reported as if it was a positive. I recall visiting Zales to see if I still had credit (nope!). That positive TL remained until 2010 when it naturally fell off the last CRA. So, the DOFD was 1997, the baddies disappeared in 2004, and it naturally dropped in 2010. It hurt my scores too when it fell off. I was sad to see it go.

[gjmmgmnt]

Thank you llecs and compassion101. It's just been confusing because I definitely don't want to continue to pay on an account that will be dropping off in August. So if and when it drops off the account cant come back and bite me. I guess at that point I can stop making the payments.

[RobertEG]

The creditor and/or debt collector can continue to report the CO/collection forever, if they choose to do so.  Section 605(a) is not a bar on credit reporting or retention of the information in your credit file.  It is a block imposed on the CRA against their continued inclusion of the information in your CR.  If items remain after their exclusion period has expired, the proper procedure is not to dispute the reporting by the creditor/debt collector, but rather to file a complaint against the CRA for their violation of section 605(a).

CR exclusion, of course, prevents others from discovering an unpaid debt based only upon a pull of your CR.  The debt is still owed, and others can become aware of it by other means.  So if you decide not to pay based on CR exclusion, you take your chances as to future discovery of the unpaid debt.  The OC most certainly will retain those records, and can base denial of credit upon their own business records.  Under some circumstances the section 605(a) exclusion does not apply, such as with respect to future requests for your CR that involve a principal amt of $150K or more.  FCRA 605(b).  And a future creditor can always simply ask if you have any old, unpaid debt, regardless of CR exclusion.

[gjmmgmnt]

Wow. That was valuable information than you.