Tenant Debt Expiration Time?

Dear Fellow Landlord

You'd be amazed at how many landlords have ex-tenants who owe them money! Many landlords call me to ask how long they have to sue the former tenants before the Statute of Limitations kick in. Since the LPA began offering the credit bureau debt reporting feature as a free bonus, landlords have been joining the LPA only for that. (Keep in mind that all the Essential Forms are also included in the membership (over $1,000. retail value) at no charge!)
Today's article is by John Ulzheimer about consumer debt and how long a creditor has to collect .

In this newsletter:

• Does Debt Have an Expiration Date?
  
• Tenant Debt Reporting to Credit Bureau
  
• I've Extended our New Year Special: Coupon Code or FREE YEAR!
  
• Community Buying Group: Aren't you taking advantage of it?
  

Please e-mail us if you have any questions or would like to add or share any material / information. Have a great month and an even more successful year ahead.
John Nuzzolese
John@theLPA.com

Does Debt Have an Expiration Date?

Consumers rarely set out to create credit problems for themselves. Most people don’t wake up thinking, “Today is a great day to stop paying my bills. Let’s see how quickly I can trash my credit scores.” Instead, bad credit and debt problems tend to come from either bad luck or poor planning on the part of the consumer.

Unfortunately, the world of credit reporting is self-policing and credit mistakes can haunt a consumer for many years. Creditors and the credit bureaus rarely accept excuses, even legitimate excuses, for unpaid debt.

And while the lenders’ decision to report late payments to the credit bureaus is voluntary, it’s so consistent that it seems mandatory.

Thankfully in most cases delinquent debt is not able to haunt consumers forever. There are strict time limits that control how long a creditor may legally pursue a consumer for unpaid debt.

However, as with many credit and debt related topics, there is a lot of confusion on the subject and most people do not truly understand the time limits associated with unpaid debt. Take a look at five overlooked facts regarding unpaid debt and how long they can hang around your neck:

1. The two clocks

When a consumer promises to pay back a debt based on terms they’ve executed, it’s called a “promissory note.”

This note gives creditors the right to attempt to collect said debt in the event of a default. Should a consumer become delinquent on payments then the creditor can take actions to compel the consumer to pay.

These actions put pressure on the consumer to pay back the debt and include tactics like (A) reporting negative information to the credit bureaus, (B) selling it to a collection agency/debt buyer or even (C) suing the consumer.

All of the collection tactics above are governed by time limits. The statutes of limitation that govern the pursuit of unpaid debts are often informally referred to as “clocks.” There are two statutes of limitation (SOL) clocks involved in protecting consumers who have defaulted.

The first clock controls debt collection and the second clock controls credit reporting. Although both SOL clocks are concerned with the same event — an unpaid debt incurred by a consumer — the clocks are completely separate and do not influence one another whatsoever.

2. Time-barred debt

The first SOL clock concerns how long a creditor is allowed to file a lawsuit against a consumer in an attempt to collect an unpaid debt.

Once the SOL for lawsuit-based debt collection has passed, the debt is referred to as being “time-barred.” When a debt becomes time-barred the creditor no longer has the ability to sue the consumer in an effort to collect, although some will try.

Debt becomes time-barred based upon the state laws where the consumer lived in when the debt was initially incurred, or the state law that governs the promissory note, which is also normally the state were the consumer lived when incurring the debt.

Each state sets its own SOL clock for when debts become time-barred. The SOL clocks range from 3-15 years. Here is a cheat sheet:

# of Years Before a Debt Becomes Time-Barred:	State:
15	KY and OH
10	IL, IN, IA, LA, MO, WV, WY
8	MT
6	AL, AK, AZ, AR, CO, CT, GA, HI, KS, ME, MA, MI, MN, NV, NJ, NM, NY, ND, OR, SD, TN, UT, VT, WA, WI
5	FL, ID, NE, OK, RI, VA
4	CA, PA, TX
3	DE, MD, MS, NC, NH, SC, Washington D.C

3. Time-barred debt exceptions

Certain types of debt, namely federal student loans and tax liens, will never become time-barred. In other words, there is no SOL clock and no expiration date for the collection of these obligations....

Click here for the full article

Have you ever been beaten by a tenant on the rent? Most of us have and unfortunately, it is one of the costs of doing business as a landlord.
On the brighter side, remedies are available for many. If you have documented your tenancy with the proper paperwork including a rental application, lease agreement, late notices, etc., you may have a chance of collecting.

Credit bureau reporting is an option in which many modern landlords are beginning to participate....

Click here for the full article

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