Payment Plan Restarting the Clock is a Myth

[Anonymous]

According to Experian. Yet I have read many posts and blogs stating that the opposite. Make of it what you will.

http://www.experian.com/blogs/ask-experian/2014/08/07/payment-plan-charge-off-delete-remove/


Aug 07
2014

Entering payment plan will not “restart the clock” for removing charge off

Posted by maxine.sweet under Featured, Life Events, Report Advice
balancesheet


Dear Experian,

I have a charge off from 2009. I am in a payment plan. Does this mean I started the clock over on when the charge off will be removed?

- EYJ


Dear EYJ,
Entering the payment plan did not “restart the clock” for removing the charge off unless you opened a new account and rolled the debt into it.
Federal law requires that lenders and collection agencies report the original delinquency date of the debt, which is when the seven-year time starts. That date cannot be changed, even if the lender sells or transfers it to a new owner.
If your account was charged off, or written off as a loss, that account will still be removed once the seven years is up, even if you are now making payments on the debt.
In this case, once the account is paid off, the status of the account will be updated to show that it is a “Paid Charge off”. Although the account will still be negative due to the payment history, a paid charge off does look a little better than an unpaid charge off.
Thanks for asking.
Maxine Sweet
Vice President, Public Education

[ravaage]

Anyone have experience with this? Would love to know if true!

[justrock]

I think if you MISS a payment now it will restart the clock. You will have a new DOFD.

[RobertEG]

There are two separate periods running.

First is the period after which adverse information must be excluded from a consumer's credit report, and second is the period specified under your state law after which the statute of limitations on obtaining a judgment on the debt expires.

Credit report exclusion periods are set forth under FCRA 605(a), and yes it is true that payments will not reset the 7 year plus 180 day maiximum credit report exclusion period for either a collection or a charge-off. 

As for the SOL for initiating legal action, some states do provide for reset of running ot the SOL on initiating legal action if paments or firm offers to pay are made.

The state SOL period or any reset of the period is totally separate from and unrelated to the credit report exclusion period.

The only "myth" is that the periods are the same.

Apples and oranges.

[Anonymous]

Thank you for that clarification Robert! Excellent, really helped.

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@RobertEG wrote:

There are two separate periods running.

First is the period after which adverse information must be excluded from a consumer's credit report, and second is the period specified under your state law after which the statute of limitations on obtaining a judgment on the debt expires.

Credit report exclusion periods are set forth under FCRA 605(a), and yes it is true that payments will not reset the 7 year plus 180 day maiximum credit report exclusion period for either a collection or a charge-off. 

As for the SOL for initiating legal action, some states do provide for reset of running ot the SOL on initiating legal action if paments or firm offers to pay are made.

The state SOL period or any reset of the period is totally separate from and unrelated to the credit report exclusion period.

The only "myth" is that the periods are the same.

Apples and oranges.

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[Anonymous]

For more clarification,

What if you negotiate a lesser amount or full amount?  Does it still impact your score by posting your payment as renewed activity?