Q&A: Collection Agency Sent Bills to Wrong Address

Hi Lee,

My name is Melissa and I came across your page form a google search. I am hoping you might be able to provide some guidance. 

In April, I received an email notifying me that there was a change to my credit report. There was a debt from 2010 (an ambulance ride to the ER) that was added. After some digging, turns out the account was sold in July 2010 to the collections agency. The agency is telling me they never received it until March 2011. Initial bills were sent to an address I haven't lived at in years, also had two other addresses on file, places I never lived, nor know anyone that lived or lives there. I have since began the dispute process. 

I am getting statements printed out from my bank from that time to see if there were any payments made to make sure this is in fact an unpaid debt. 

My question: Am I responsible after all this time? This is clearly an error on their part. At the time, I asked the hospital representative if all bills were set up on a payment plan and she verified that they were and I made monthly payments. If this was left off, why did it take 4 years for it to come to my attention? I live in NJ, however I am in the process of moving to NYC. The bill is for something that happened in Florida.

Any insight, recommendations or information would be greatly appreciated. Thank you!

--
Melissa 

Melissa,

The statute of limitations (which is the amount of time a creditor or debt collector can sue you for a debt) differs by state. In Florida, the statute of limitations is four years. In New Jersey and New York, its six years.

If you lived in Florida until July of 2014, the statute of limitations would expire and you would be free to move to another state without fear of getting sued--even if the new state's statute of limitations is much longer than Florida's.

The problem that arises here is that, if you move before the statute of limitations expires, the SOL is "tolled" in your original state of residence. That means that, as soon as the collection agency discovers that you are no longer living there, the clock on the statute of limitations just stops ticking. When and if you move back, the statute of limitations goes back into effect and begins to time out from where it left off when it was tolled.

If the collection agency was not aware that you moved out of Florida until now (and you didn't give them the date that you moved when you spoke with them) its very possible that the statute of limitations was never tolled and simply timed out on its own. That would mean you're safe no matter which state you move to. If the addresses the collection agency was sending letters to were in Florida and you didn't disclose your new address until after July 2014, you should be safe from a lawsuit.

If, however, the collection agency is aware of the fact that you moved, they can generally opt to go by the SOL in your current state. This is advantageous to the collector, since they'd have until July of 2016 to collect the debt. Now, this part is important, so listen well:

The date that the collection agency originally received the debt is irrelevant. The only date that matters is the date you made your last payment (or, if you never made any payments, the date that your payment was originally due). It makes no difference whatsoever that the collector didn't get its hands on the account until 2011. The SOL and the credit reporting period are calculated using the dates from the original account.

 If a collection agency could use its own dates to determine the statute of limitations and the credit reporting period, no one would ever be free from collection lawsuits and bad debts would hang around on your credit report indefinitely. So don't worry about the date they bought the debt or first reported the debt. It just doesn't matter.

You mention that you are contacting your bank to determine if you made any payments on the debt. Normally making a payment on the debt restarts the statute of limitations from scratch. In Florida, however, you have to provide the creditor with a written promise to pay in order to restart the clock (Just for reference, the same is true in New York). So unless you promised to pay the debt in writing, the SOL was never interrupted and may have timed out in Florida.

The statute of limitations and the credit reporting period are two entirely different things. The credit reporting period begins 180 days after your last payment and lasts for seven years. As I stated above, the date the collection agency bought the debt or originally reported the debt doesn't matter. They have to remove it after the credit reporting period expires. The credit reporting period is the same no matter which state you live in.

Your responsibility for the debt is a gray area. Technically, if you took the ambulance ride and the debt is legitimate, you are responsible for paying the debt no matter how many errors the hospital or collection agency made when trying to collect it.

You said you spoke to a hospital administrator that assured you all bills were set up on a payment plan. If you have that in writing, that gives you grounds to fight this. You'll still be responsible for paying it, but you can probably use that statement to convince the hospital to pull the debt out of collections (and no matter what they tell you, they CAN pull the debt out of collections--even if the account was actually sold and the debt collector isn't working on a contingency) and remove it from your credit report. If all you have is someone's word, you lack proof that this was a legitimate error. It's also possible that the ambulance company bills separately from the hospital itself and that's what caused the issue.

If the ambulance company does not bill separately from the hospital and you have a statement in writing from the hospital noting that all of your debts have been added to a payment plan It could be argued that, if they hadn't made these errors, you would have paid the debt before it ever hit your credit report. In general, however, you aren't absolved from your responsibility to pay a debt simply because you didn't receive a bill.

If the statute of limitations has expired, you are no longer legally responsible for the debt and they can't force you to pay it. Keep in mind that the collection will remain on your credit report regardless of whether you pay the debt or not, and paying a collection account does not improve your credit scores. You do have the right to dispute the debt both with the collection agency itself and the credit bureaus.

If you have the funds to do so, you might consider hiring a consumer law attorney to help you. I don't know the full details of your case, but the original creditor obviously made some blatant billing errors that cost you your good credit rating. A good attorney should be able to help you straighten this out, even if it means filing a lawsuit or two to strong-arm the hospital into taking you seriously and recalling the debt.

One last thing, while you're disputing the collection you should also consider disputing those addresses on your credit report for places you never lived. You don't want another creditor to bill you at one of those addresses only to have this nightmare scenario repeat itself.

Best of Luck
Lee

Q&A: Collection Agency Not Updating Credit Report After Debt Settlement

Hello Lee,
I hope you can help me here. I called a collection agency to inquire about a debt I have settled and asked why this was not reported to the credit bureaus and they said they did even if my Equifax still shows it as unpaid. then they asked to talk about another account and I was surprised. It is an old account from 2005 that was not showing on my CR and my first reflex was to say I have no knowledge of this and she kept asking if this was my mine and still said I have no knowledge of it. can they use this to restart the SOL?

--Anonymous

Anonymous,

Ok, lets address the credit reporting issue first. Federal law requires the collection agency to report changes to your account and requires that the credit bureaus keep these records updated and accurate. All too often something gets lost in translation. I'm going to give you two methods of dealing with this, but I need to first point out that, if you're doing this to improve your credit scores, you're wasting your time. Collection accounts have the same negative impact on your credit scores regardless of whether you've paid them off or not. Although paid collections may illustrate to some lenders that you're making an effort to be responsible, paid collections are just as bad for your actual scores as unpaid ones. 

You have two options here: 

Option #1:

Make a copy of the credit report that shows the collection account as unpaid. Use a permanent marker to black out any identifying information on the credit report (because you never know what information they do or don't have, and you don't want to give them the tools they need to pursue you in the future). You'll also need to make a copy of your proof of payment to the collection agency. I sincerely hope you requested a zero balance letter. If not, provide a copy of the collection agency's written settlement offer and evidence of your payment, such as a cancelled check. 

Write a letter to the collection agency pointing out that your Equifax credit report still shows the debt as being unpaid. Feel free to point out that federal law requires the collection agency to update your tradeline with each credit bureau. Demand that they immediately update your credit records and, if you're feeling squirrelly, threaten to sue.  Oh, and make sure you send your letter via certifed mail, return receipt requested. This forces the collection agency to sign for the letter and prevents them from claiming they never received your dispute. 

Option #2:

Make a copy of the credit report that shows the collection account as unpaid. Make copies of your proof of payment along with a copy of your settlement letter, just as before. This time, however, you're going to write a letter to Equifax disputing the debt. Point out that the collection agency is not abiding by federal law in reporting this account correctly. Refer to the documents you've enclosed and request that Equifax investigate the entry and update it accordingly. 

If both methods fail, you could call and attorney and file a lawsuit. You'd be well within your rights to do so, and it might even be worth it if better credit were the result of all that hassle. The only way these disputes could improve your credit rating would be if the credit bureaus decide to delete the collection agency's tradeline rather than merely correct it. 

Ok, on to the statute of limitations. 

I wish I knew what state you're in, but it shouldn't matter. The odds are on your side that your nine-year old debt is no longer within your state's statute of limitations and the collection agency can't sue you. States have very strict guidelines dictating what does and does not restart the clock on the statute of limitations. Merely having a phone conversation with a debt collector isn't enough to renew the SOL on this debt. Heck, you didn't even admit that you owed it. You're in no danger on that front. Also, the collection agency can't legally reinsert the debt into your credit report, but I'd keep an eye on it just the same if I were you.

Given that you've just settled a debt with a collection agency, you need to know how to protect yourself. I know you didn't ask me about this, but its important that you realize that the collection agency may just turn around and sell the unpaid part of your settlement balance to another collector--letting the nightmare begin anew. Take the settlement offer and your proof of payment and put them away somewhere safe. If you get a call from a new collector in the future, you can use these documents as proof that the debt is no longer viable.

Best of Luck,
Lee

Q&A: Does Agreeing to Pay Collections Restart the SOL?

Hi Lee,

I have two negative reports on my credit report, they are both supposed to fall off in 2 years. I made the mistake of calling both collection agencies, and agreed to make payments in the next couple of months. I can certainly pay them, however, I am worried that paying the full debt may reactivate the 7 year negative credit history. 

Can agreeing to pay the debt restart 7 year negative history? These accounts are so old, I have no record of any paperwork, and no one can seem to tell me the exact date of first delinquency. 

Should I just pay the full debt, have them agree to report to credit bureaus as 'paid in full?' Will this help my score and to have it removed from my report when the 7 yrs is up?

Thanks for any advice you can offer.

--Jenny


Jenny,

You're confusing the statute of limitations for lawsuits with the credit reporting period. The statute of limitations is the amount of time a collection agency has to sue you and the credit reporting period is the amount of time an item can remain on your credit report. These are two entirely different time periods.

Making a payment on a debt that's in collections does NOT restart the 7-year credit reporting period. The clock starts when the debt first becomes 180-days delinquent. Although you may not know when the date of first delinquency occurred, pulling your own credit reports should show you when the negative entries are scheduled to be removed from your credit report. If it were me, I'd pull my credit report right now and print it out. That way, if the collection agency (or any other debt collector that may purchase the debt in the future) decides to "re-age" the debt and reinsert it onto your credit report, you'll have rock solid evidence to provide to the credit bureaus proving that the debt in question is obsolete and should be removed.

Unfortunately, making a payment on your debt does have one very negative effect: It restarts the statute of limitations in most states (in some states you must agree in writing to make a payment before the SOL begins anew). Once the statute of limitations is back in force, the collection agency regains the right to sue you. You don't mention which state you're in (the SOL differs by state) but you did mention the debts are old. Thus, its likely the statute of limitations has already expired.

Agreeing to pay collections--and then following through with that promise--can be a very risky prospect if you're not paying the debt in full all at once. This is because, unless you have a written agreement with the collection agency that says otherwise, the company has the right to file a lawsuit against you as soon as the statute of limitations kicks back into gear--even if you haven't missed a single payment. As it stands, if the SOL has expired, the collection agency's hands are tied. They only get the money if you pay voluntarily.

So don't panic. It's easy to become intimidated by a debt collector and agree to pay a debt when you can't (or shouldn't), just to get off the phone. The good news is that agreeing to pay won't likely hurt you. If you weren't merely intimidated and you genuinely want to take care of your debt, make sure that you secure a solid agreement, in writing, with the collection agency that stipulates the company agrees not to sue you unless you miss a payment.

Wanting to take care of unpaid debts is admirable, but be warned: paying off collections does NOT improve your credit scores. Collection accounts have the same negative impact on your scores whether they're paid in full or you've never paid a dime.

In my opinion, paying this debt is pointless. It doesn't help your credit and the credit reporting period doesn't change. Whether you pay it or whether you don't, it will still remain on your credit report for another two years.

Best of Luck,

Lee

How Much Do Medical Collections Hurt Your Credit Score?

No one, unless they're sporting a major case of Munchausen, wants to find themselves hospitalized. It's just too expensive. Even people with insurance are often responsible for co-pays and co-insurance charges that far exceed what they're able to pay. As a result, it isn't uncommon for medical debt to end up in collections. Roughly 50 million people in the U.S. are currently making payments on some form of medical debt. Many don't succeed--making medical bills the number one cause of bankruptcy in this country.

If you're one of the many Americans living paycheck to paycheck, paying off exorbitant medical bills may not be an option. Ignore your medical debt, however, and it will eventually end up in collections and damage your credit scores. This is the choice that thousands of Americans are faced with: go without necessities in order to make payments on medical debt or let their credit scores take a hit.

How Do Unpaid Medical Bills Affect Your Credit Scores?

If you don't pay off your medical bills, the doctor or hospital you owe will eventually turn your account over to a collection agency. The collection agency's task is to collect as much of the debt as possible. The collection agency keeps a percentage of whatever they collect as payment for their services.

A medical emergency may cost you your good credit.

Hospitals and doctors' offices don't report your debts to the credit bureaus. Even if you set up a payment plan and faithfully adhere to that plan, the payments you make toward your medical bills don't show up on your credit report and help boost your credit scores. As unfair as it sounds, the only impact medical debt can have on your credit report is a negative one. Collection agencies routinely report their accounts to the credit bureaus. Collection accounts are always negative and will significantly damage your credit scores. Paying off the debt doesn't change this. Paid medical collections are just as damaging to your credit rating as unpaid ones.

How Much Medical Collections Hurt Your Credit Scores

The affect any item--positive or negative--has on your credit scores depends on how good or bad your credit is when the item initially appears on your report. The better your scores are when a medical collection appears on your report, the more credit points you'll lose. I'll give you some ballpark figures, but none of this is set in stone. In other words, your mileage may vary.

On average, a collection account of any variety will cost your credit score about 100 points. If you have excellent credit, expect your scores to take a bigger hit. The opposite, of course, is true for those with bad credit. If your credit is already in shambles, you may lose only 50 points--sometimes less. Time also plays a big role in the impact a medical collection has on your scores. The older a collection account is, the less it affects your credit.

How Long Does Medical Debt Stay on Your Credit Report?

Medical collections remain on your credit report for seven years. The original delinquency date generally won't show up on your credit report. What will show up is the date the collection agency first reported your medical debt to the credit bureaus. That date has no impact whatsoever on the date the credit bureaus must remove the item. The date of removal is set in stone regardless of what state you live in or whether or not you've ever made a payment on the debt.

The exception to this rule is if the collection agency sues you and wins a judgment. A judgment will remain on your credit report for either the amount of time that the judgment is enforceable in your state or seven years, whichever period is longer. In addition to giving the collection agency a wider range of debt recovery options, judgments also do significant damage to your credit rating.

Medical Collections Often Carry Less Weight With Lenders

Now for the good news. (Didn't think there was any of that, did you?) Lenders who pull and review your full credit history often place less importance on medical collections than other types of collection accounts. This is because a medical collection on your credit report doesn't scream "I'm financially irresponsible!" like, say, a defaulted credit card. Lenders know that medical emergencies are out of your control. Thus, even though the medical debt shows up on your credit report and hurts your scores, it may not be an obstacle with some lenders.

There are exceptions to this rule as well. If the debt is still within your state's statute of limitations, your lender has the right to turn down your application until you either pay off the debt or the statute of limitations passes. This is nothing more than the lender protecting its own interests. After all, no lender wants to finance an item that can be liened or seized due to an unpaid medical collection.

Related Posts:

Can a Doctor or Hospital Send Medical Bills Directly to Collections Without Notifying You?

Keeping Medical Debt Out of Collections and Off Your Credit Report

Debt Collection Lawsuit Statute of Limitations By State

Q&A: Has My Credit Card Debt Been Re-aged?

Hi Lee, 

I've been reading your Collection Agency blog. Thank you so much for doing this- it's been very helpful. 

Seven years ago, I defaulted on my credit cards due to a long period of unemployment.

Much of this debt should have fallen off my credit report in April and the SOL expired in my state in 2011 for some of the debt and 2012 for the rest of it. I stopped making most of my payments in March 2007. The Credit Bureau told me that it depends on when the creditor reports me as delinquent. 

In 2012, I disputed a few instances of re-aged debts with the Credit Bureau, but they told me at the time not to worry about the collection account's difference in reporting dates-- that they knew the original creditor's date of first delinquency, and that the collection agency's date of reporting didn't matter. When I contacted them again this April to ask why the debt hadn't fallen off my report, they claim to need information to make a change to the report. Should I send them the copy of that dispute I made in 2012? I am not sure what to do. I assumed the debt would fall off automatically. In one case, the date of first delinquency is reported as 2009, but that's well over 2 years after I stopped paying.

Equifax said the debt remains for 7 years, but I've read some blogs that say 7.5 years, so I'm confused on this. What is considered the first 'delinquent' date? In California for purposes of the SOL, it is considered the last time you made a payment. Would this be considered the Date of First Delinquency to the Credit Bureau? Or would it have been when the cards were 180 days past due? I know I was reported with a 30 day late in April 2007.

Thanks so much for your advice. 

Beth

Beth,

The credit reporting period works like this: Federal law requires the credit bureaus to remove your delinquent debts after seven years, but the seven-year clock doesn't even start ticking until your debt is 180 days old. The clock for the 180-day period begins ticking on the date of your last payment. The reason it takes 180 days to start the 7-year reporting period is that the 180-day mark is the point where most credit card companies "charge-off" the debt. That doesn't mean the debt is gone, of course, its simply to get the bad debt off that year's books for accounting and tax purposes. 

Of course, during this 180-day period, the debt is probably going to show up as delinquent on your credit report. That means that, although the credit reporting period is technically only seven years, its normal for a debt to hang around on your credit history for 7.5 years before being removed. 

If your debt was 30-days delinquent in April of 2007, that means that the credit reporting countdown didn't begin on the debt until September of 2007. Thus, don't expect the credit bureaus to remove it until September 2014. And they were right to tell you that they know the original delinquency dates--they do. The original creditor's automatic reports to the credit bureaus always contain dates. These dates don't always show up on your credit report, but they're there. The dates you see on your credit report for collection accounts generally reflect the date the collector first received or first reported the debt--not the original date of first delinquency from the original creditor. 

The statute of limitations for lawsuits is a totally different beast from the credit reporting period. The statute of limitations refers to the period of time in which a creditor can sue you for the debt. The statute of limitations for debt is calculated from the date of your last payment, and it doesn't carry the same 180-day "waiting period." The bad news, of course, is that if you make a payment you restart the clock on the statute of limitations and the collector regains the right to sue you. Making a payment does not, however, have any effect on the 7.5 years that a negative item will remain on your credit report. 

Long story short, you don't need to send the credit bureaus anything. Their computer system has the original dates on record and should automatically remove the original creditor's tradeline and the collection account attached to the debt in September. Just to be safe, consider pulling your free credit reports this October to ensure that both negative accounts are gone. 

Best of Luck,

Lee 

Related Posts:

Removing Re-aged Collection Accounts From Your Credit Report 

Credit Reporting Period vs. Statute of Limitations

Can You Reset the Statute of Limitations on a Debt? 

Does Requesting Debt Validation Restart the Statute of Limitations?

I've been getting a lot of comments on another post from people who all seem to want to know whether or not requesting a debt validation will restart the statute of limitations on their debts. Everybody knows the rule is to lay low--especially if the original statute of limitations has yet to expire. Nobody wants to put a target on their head. But if you're trying to clean up your credit, a debt validation request is often a vital step in that process.

The simple answer to this questions is a resounding NO. Asking for validation doesn't restart the clock on

Debt validation doesn't reset the SOL clock.

your debt's SOL or renew the credit reporting period. Nor does it give the collection agency any additional cards to play. But if the debt is old, don't get too excited when the collection agency doesn't respond. Although you are free to send a debt validation request whenever and however you please, the collection agency doesn't have to acknowledge it. I know what you're thinking, "Great! The law says no collection activity until they respond!" But, unfortunately, its not that simple.

The Fair Debt Collection Practices Act has the following to say about debt validation time limits (and if you're interested in looking for yourself, this is Section 809):

Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

So, to put this in layman's terms, the collection agency is only bound by the "no collection until validation" rule if you fired off your validation within the first 30 days after being notified of the debt. Now, its perfectly possible to not be notified of a debt until its several years old. That doesn't affect your validation rights. You have 30 days from the initial notification.

And sure, a collection agency probably can't "prove" that it has called you over 5000 times, or sent umpteen letters to your house, but they do keep records. If they've contacted you and your 30 days has run out, claiming you weren't aware of the debt is hit or miss--and its unlikely your claim will stand up in court in the face of their records, if it comes to that.

Now, while sending a debt validation letter will not restart the statute of limitations in any way, it does call attention to you. Most people who send these letters do so because its just another rung on the clean credit ladder, not because they are legitimately confused as to whether or not they owe the debt. If this debt is several years old and there has been no activity on the account, sending a debt validation letter is basically saying, "Hi Mr. Big Bad Collection Agency!! I'm here! Been here all along! I care about getting rid of this debt so please come and harass the you-know-what out of me!"

That's not to say that you shouldn't immediately request validation of any collections you don't recognize on your credit report, but if the SOL on the debt has yet to run out and you've been "laying low", calling attention to yourself probably isn't a good idea, so validate at your own risk.

Related Posts:

Debt Validation After 30 Days

Can You Reset the Statute of Limitations on a Debt?

What to Do When a Collection Agency Validates Your Debt

Collection Lawsuit Statutes of Limitations By State

Q&A: Will Midland Credit Management Sue?

Hello Lee, 

I am unable to post to your blog for some reason, but I have been reading your blogs and you have some great information. I hope you are able to provide some insight on some of my questions regarding Midland Credit. 

My problem is that I have a super old account from Beneficial Household Finance from 2007. My DOFD was 5/2007 and at that point the debt was approximately $2800.00. In 2009, I understand that HSBC closed Beneficial Household. In May of 2010 Midland purchased the debt (or so that is the date that is stated on my credit reports that they purchased the debt). In December of 2010 they said I made a payment. And I kept racking my brain to try to figure out why I would have made any kind of payment to these scumbags. Perhaps I was just trying to do the right thing. So since I had paid off some accounts through a non-profit organization "Consumer Credit Counselors" I called and checked with them.... Sure enough they made a payment going to Midland for my Beneficial account in December of 2010. So now I have renewed the SOL and it will be on my credit report for 3 more years. Midland is now saying that I owe them $9700.00!!! How can they escalate to such an outrageous amount? And then just this year they started sending those ridiculous offer letters and calling twice a day on my phone, but I never answer them. Now it seems that they have recently stopped or slowed down. Is this a sign that they are getting ready to sue me?

This was an account that was a revolving type of account like a credit line, but it was not a credit card. I am in Nevada so does that mean that the SOL is 4 years (for an open ended account) or 6 years (because it was a contractual account).

So I will get to my questions based on the information above, and if you need more info from me in order to answer them, please let me know:

1) What do you think the likely-hood of Midland getting ready to sue me is?
2) Is it possible that they may give up and sell the debt? If so, what happens next?
3) They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?
4) Do you think the SOL for an account such as this would be 4 years or 6?
5) Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?
6) Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?
7) Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 
8) Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?
9) How can a $2800 debt turn into 3x the amount originally owed?
10) What are my options to fight them and get this off my credit report?

Thanks for your input!


--Monique


Monique,

For starters, thanks for letting me know which state you're in. State laws often apply and you wouldn't believe the number of people who don't include their state in their question.

I get from the tone of your letter than your credit report and scores is the most important thing to you here and on that front I have some good news and some bad news. The good news is that the date Midland first purchased and reported your debt has no effect whatsoever on the debt's reporting period. The credit reporting period for most debts, including this one, is seven years from the date of first delinquency. That means that if you made your last payment to Beneficial Household Finance in May of 2007, the credit bureaus will remove the account records--including all collections associated with that particular debt--in November 2014. That means you've got six months to wait until federal law requires the credit bureaus to remove Beneficial Household's original charge-off and the Midland collection account that resulted from the charge-off. The payment your credit counseling agency made has no effect on this. It comes off in six months, paid or unpaid.

That being said, lets get to your questions. I'm doing them out of order so that I don't have to go back and rehash anything and this can be as simple as possible.

Do you think the SOL for an account such as this would be 4 years or 6?

Credit cards are generally considered open accounts as far as the statute of limitations is concerned. Sometimes debt collectors who want to sue will try to argue that the debt is, in fact, a written account since the SOL for written accounts tends to be longer. Your state's statutes pretty clearly define credit card debt as an open account. That means your statute of limitations on this debt is four years. This gives Midland seven months to sue you or hang up their hat.

You can find Nevada's stance on this here. Read NRS 97A.060 at the very top of the page.

How can a $2800 debt turn into 3x the amount originally owed?

The fine print of your original credit card agreement contained a clause stating that, by agreeing to the card, you were also agreeing to the accrual of interest that would continue even if you defaulted on the account. So even though the account is no longer open, credit card interest has been accumulating ever since 2007. That's why your debt is now so much higher than it was when you originally defaulted.

What do you think the likely-hood of Midland getting ready to sue me is?

That depends on a wide variety of factors. If they're serious about suing you, they'll likely start to investigate you. They need to know if you are employed or receive income they can't garnish (such as Social Security) and they'll want to know if you own property they can place a lien on or if you are just a renter. Any collection agency, to increase its chances of actually getting paid, is going to go after the people who are most likely to have the funds to actually pay the debt. You can't squeeze blood from a turnip, and if you don't have assets Midland can seize, you may not be worth the time and money it takes to drag you to court.

You are, however, dancing around the danger zone. Not only do you have a debt high enough to elicit a lawsuit, you're nearing the end of the statute of limitations in your state. Most collection agencies will throw everything they've got at you and use lawsuits as a last resort, since they're left holding the bag for the legal fees if they can't collect the judgment.

Keep in mind that Midland can sue after the statute of limitations expires. The case would get dismissed on the grounds of an expired SOL, but only if you bring the expired SOL to the court's attention. I don't know Midland's policies well enough to say whether or not they habitually file out-of-statute lawsuits.

Since Beneficial closed in 2009 and Midland purchased the debt in mid-2010 how likely do you think it is that they have documentation of the debt?

A record of the debt exists, otherwise you wouldn't have Midland on your back. But Midland will need more documentation than just its word to prove this case in a lawsuit (if you show up to defend yourself). If they sue you and you don't show up, they win by default without needing any proof. Most debt collection lawsuits end this way. If I were to guess, I'd have to say its highly unlikely that they have the kind of documentation to prove a case against you if you respond to a summons and demonstrate your intention to fight the lawsuit all the way down. Collection agencies buy debts in bulk and thus often have no records to support their claims--just a name and the amount the person supposedly owes.

They have the last recorded payment from CCCS as 12/2010, but how likely is it that they will have documented proof that it is for me and to be applied to this account?

The documented proof that the payment occurred is that the payment occurred. They should have no problem proving that via electronic records. As for whether or not the payment was sent from the credit counseling agency specifically for your account...that's trickier. It's an interesting claim to challenge because, if they can't prove it, that means the SOL has technically already expired. This is just my opinion, but this seems like a very weak defense because its relatively easy for them to request those records from the credit counseling agency that made the payment in the first place.

Should I contact a consumer protection attorney and discuss the possibilities with them before I get served? 

You're clearly worried about this otherwise you wouldn't have contacted me. The fact remains, however, that while you're well within your rights to consult an attorney, he/she isn't going to be able to save you from a danger that simply hasn't presented itself yet. I know its agonizing to wait and see what Midland does, but its a heck of a lot cheaper than hiring an attorney who's going to charge you a couple hundred dollars to tell you exactly what I'm telling you right now for free. Or worse--one who'll be shady enough to refer you to a bankruptcy attorney. If you opt for an attorney, be very, very careful taking that route. There's some thumping good lawyers out there who genuinely care about the little guy, but there's just as many who see you as just one more way to line their wallets. Do your homework on this one.

Should I just continue to play Ostrich on this for now since they have been unsuccessful in contacting me?

They haven't been unsuccessful in contacting you. By your own admission they are calling and sending letters to your home address. If it were me, I'd keep a record of this. Every call you get, write down. Every letter you get, save. This way, if they try to gutter sue you and get a default judgement using a fake or outdated address, you'll have proof to use in court to have the judgment vacated later on. So no, do not become an ostrich. Become a hawk. Watch and wait and pay attention. Because guess what? In your state, failure to properly serve a summons is grounds to vacate a judgement. That doesn't mean you shouldn't do your best to fly under the radar, if you catch my drift. Making contact with them now, right on the cusp of the expiration of the SOL, would probably be unwise...

 Is there any way I can be proactive now (without making payment arrangements on a debt that is 3x the amount that I actually owe)?

Not to my knowledge. The time for proactivity passed quite a while ago. At this point, even paying the original amount isn't going to clean up your credit. It won't even leave you with a "paid in full" mark on your credit report. If you paid the original amount now, the collection agency would likely just sell the remaining unpaid balance to another collection agency and this nightmare would begin anew. Your best way of being proactive is to know your rights and exercise them when and if it becomes necessary to do so.

What are my options to fight them and get this off my credit report?

Well, as we've seen, this thing should come off your credit report on its own fairly soon. If it doesn't, that means its been re-aged by Midland. That's when you can send a nice letter informing them that it is against the Fair Credit Reporting Act for them to continue reporting an account 7 years and 180 days beyond the date of your payment. Failure to adhere to those rules leaves them subject to a consumer lawsuit. Here, I'll even quote you the statute: You can find this under section 605 in the Fair Credit Reporting Act, page 22

Information excluded from consumer reports. Except as authorized under
subsection (b) of this section, no consumer reporting agency may make
any consumer report containing any of the following items of information...

Accounts placed for collection or charged to profit and loss which
antedate the report by more than seven years.

 I always recommend that people reach out to the collection agency for corrections first because, while you have every right to dispute the item as "obsolete" with the credit bureaus, you're once again in a situation where the collector has the ability to verify the lie and suddenly it becomes that much harder to dispute. Once they've "investigated" once, federal law doesn't require the credit bureaus to investigate a second time. If its any comfort, from what I know of Midland, they're pretty good about deleting their tradelines on time.

Now, this brings us back to that gargantuan debt they claim you owe. Midland, in my experience, will occasionally shelve debts rather than selling them to other debt buyers. In other words, once the SOL and reporting period have expired, the debts seem to disappear as well (that's weird for a collection agency, but I have seen Midland do this before, so you have to give them at least some credit for that)  But we have to face the facts, your debt is large and the odds are someone will have an interest in collecting it. If Midland passes the debt on to a junk debt buyer, it's very possible that this new collection agency will magically insert itself into your credit report. Be prepared for this and regularly monitor your credit from now on. You can get a free annual credit report from each credit bureau without a credit card by using the Federal Trade Commission's approved website for pulling free credit reports--AnnualCreditReport.com. Since you can get a report from each agency, I have always found it most prudent to pull one report every four months from a different agency. Unless, that is, you want to spring for a credit monitoring service.

One more thing, the expiration of either the credit reporting period or the statute of limitations is not going to cause Midland (or any other debt collector) for that matter, to simply give up on that debt. Once you're out of the woods on the lawsuit front, you may want to consider sending a cease and desist letter to put a stop to the incessant collection calls and letters once and for all. And for the love of all that is holy to you, keep a paper trail to back yourself up with the expired SOL/credit reporting period. This is incredibly important if a future collector ever decides they want to reinsert this nastiness into your credit record.

Occasionally I'll put links to other related articles that readers might find helpful at the bottom of certain posts, but the ones I'm including today are specifically related to you and your situation. This post has already become the longest Q &A I've ever done, and I don't want it to turn into a novel. Plus, there is a cheesesteak waiting for me in the kitchen and the very smell of it is fogging up my better judgment.

Best of Luck,
Lee

Related Posts:

Send a Cease and Desist Letter to Debt Collectors 

What Are Your Odds of Being Sued By a Collection Agency?

Dealing with Midland Credit Management

Removing Re-Aged Collection Accounts From Your Credit Report

Signs That a Collection Agency is About to Sue You

When dealing with collection agencies, nothing is scarier than the prospect of a lawsuit. Unfortunately, debt collectors aren't known for their ethics and will often say whatever they need to say to coerce you to make payments--including threatening to sue you. So how do you know if a collection agency actually plans to sue you or not? There is no surefire way to tell, but there are certain signs to look for that can tip you off to an impending lawsuit.

1. The Statute of Limitations is Approaching

After the statute of limitations or "SOL" passes, it technically isn't legal for a collection agency to sue you. Because lawsuits are a last resort, debt collectors will do everything in their power to ensure that you pay up before the SOL arrives and the debt is no longer enforceable. If it becomes clear that isn't going to happen, a smart collector will file a lawsuit against you before the SOL arrives. Keep track of the SOL on your debt and if you suddenly start receiving lawsuit threats around that time, take them seriously.

2. You Got a New Job and You're Paying off Debt

Think your employment record is private? Think again. New jobs often appear on your credit report and, if you owe money to a collection agency, you can rest assured that debt collectors are monitoring your credit report religiously. If your credit report shows that you have a new job and/or are paying off other creditors, the collection agency will go to great lengths to get a piece of the action--and that may just include a lawsuit.

3. You Have a Large Amount of Unpaid Debt

Suing debtors costs money. Although collection agencies can include attorney fees in the lawsuit, they may or may not be able to collect on that debt. Because the collection agency has to pay its attorney up front, it generally isn't worth the collection agency's time to sue you over a paltry amount. Just to clarify, a debt of $5000 is a lot more likely to land you in a courtroom than a debt of $200.

4. The SOL Hasn't Expired and You Blocked the Collection Agency From Contacting You

When used correctly, a cease and desist letter can be an invaluable tool to protect yourself from debt collector harassment. When used incorrectly, however, it can put you in a dangerous position. Just to clarify, a cease and desist letter informs the collection agency that it can no longer contact you. Federal law requires collectors to honor cease and desist letters from debtors. The problem arises when the collection agency can no longer contact you. If it cannot contact you, its only option to collect the debt is to file a lawsuit. This is only true, of course, if the statute of limitations has not expired. Once the SOL expires, the collection agency isn't supposed to sue you anyway--regardless of whether you ban it from contacting you or not.

5. Your Account Has Been Referred to a Real Attorney

Collection agencies are infamous for having in-house lawyers that write letters as empty as they are threatening. If you receive notification that the collector has sent your account to an outside attorney, take note. Googling the attorney should give you a good idea of what he/she does. Forums are also invaluable when it comes to getting information about whether the attorney follows through with his/her threats. Once your account is referred to a real attorney, tread carefully.

Related Posts:

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Send a Cease and Desist Letter to Debt Collectors 

Debt Collection Lawsuits: The Statute of Limitations Defense

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Settling Collections Before the Statute of Limitations Expires

Hi Lee,

I currently have an account with citi and another with usaa at $4000 each which were just charged off. I would like to get a paid for delete for both at most 50%. I plan on buying a house in a year. A CA is managing the Citi account but Citi still owns it. What do you suggest is the best way of handling both of these debts. I live in Florida SOL is 4 years and I am no where near that. I realize that settling without a PFD would not help my credit score.. Help!! Thanks..

- SA


SA,

I appreciate your enthusiasm. Unfortunately, your odds of getting a pay for delete from either of these creditors is slim to none. Let me explain:

The credit card companies want the full amount. The collection agencies also want the full amount because they collect a percentage of whatever they can convince you to pay. Even if the collection agency were to agree to a pay-for-delete for a debt this young, they only have control over their own trade line. The original creditors' trade lines that illustrated the charge offs are still going to be there unless that pay-for-delete comes from the credit card companies themselves.

I see what you're trying to do. You want to negotiate a pay-for-delete with the original creditors. Doing so would require them to pull the debts out of collections – effectively eliminating the collection agencies' trade lines – and delete their own charge offs as part of the arrangement. You then get a clean credit report and the ability to qualify for a mortgage while only paying half of the debt. 

These days, however, pay-for-delete's are a rare beast and you'll almost never be able to negotiate one with an original creditor. You may be successful in getting the debt settlement you want, and you may be successful in getting it from the original creditors instead of the collection agencies, just don't expect a pay-for-delete to be a part of that agreement. Most of the time, there's really no point to paying anything on a debt if the creditor in question won't delete it from your credit report. 

Buying a house in the future isn't an immediate concern. The potential for a lawsuit is. Although a lawsuit is more likely when you owe more than $1000, collectors in this tough economy are often suing for much less – and you're sporting two debts with a $4000 price tag each. 

Whatever you do, tread carefully. If you start making calls and asking for a settlement, that's going to show your creditors that you have some extra cash on hand that you could be using to pay the debt. Why should they agree to settle the debt with you for half of what you owe when its much cheaper for the credit card company or collection agency to simply sue you and force you to pay the whole thing? Collection agencies often don't have a leg to stand on when it comes to lawsuits, but your debt is relatively recent and there's a fair chance that the paperwork to back up your debt in court is still easily attainable – especially if its the original creditor who opts to sue. 

Don't get me wrong, I'm not saying its not a good idea. I'm just saying its not a good idea right now. If you wait until the SOL has expired on both debts before starting negotiations, the collection agencies have no choice but to work with you if they want to get paid (and if you're offering 50% of a $4000 debt, they'll want to get paid). Do it now however, and its akin to waving a red flag in front of a bull. If you think collections will hurt your chances of qualifying for a mortgage, wait till you see what a civil judgment and garnishment will do. You can certainly try, but in my opinion it simply isn't worth the risk. 

What Happens to a Second Mortgage During and After Foreclosure?

If you own a home and find yourself in a financial bind, taking out a second mortgage can alleviate your money woes. Granted, that home equity loan or HELOC (we're going to lump HELOCs into the "second

Do you really need that second mortgage?

mortgage" category for simplicity's sake) will cost you the equity you worked so hard to build, but most people end up selling their homes long before they pay off that 30-year mortgage anyway. While beneficial under the right circumstances, your second mortgage loan becomes a serious complication should your home fall into foreclosure.

Second Mortgages, Liens and the Foreclosure Process

When you take out a first mortgage, you must use your home as collateral. Your first mortgage lender attaches a lien to your property preventing you from selling the home without paying off your debt in full. The same is true for home equity loans or lines of credit. Because your home serves as the security interest for the debt, both lenders hold valid real estate liens and either lender can initiate foreclosure proceedings when you default on its loan.

During a foreclosure, loans are paid in order of priority. The first mortgage lender gets paid first because it filed its lien first. Any other lien holders are paid in the order their liens were filed – including the second mortgage lender. It often happens, however, that the home doesn't sell for enough money to pay off all of the liens the home carries – leaving some lien holders unpaid. To make matters even worse for junior lien holders, a first mortgage foreclosure wipes out all junior liens. Thus, your second mortgage lender could end up losing its security interest – your home – and getting no proceeds from the foreclosure sale.

Your Responsibility for Paying a Second Mortgage After Foreclosure 

After your first mortgage lender forecloses, your second mortgage lender's security interest – its real estate lien – no longer exists. Unfortunately for you, your contract with the second mortgage lender is still valid. You still owe that home equity loan or HELOC, and the lender isn't going to just forget about it and let you waltz away into the sunset debt-free. Not a chance.

All banks policies differ, and your second mortgage lender may allow you to continue making payments on your loan. This scenario is more likely if you continued paying your second mortgage when your first one fell into default and, eventually, into foreclosure. If you defaulted on your second mortgage along with the first, however, the lender may not give you the chance to pony up the dough voluntarily. It may just sue you.

Consequences of Second Mortgage Debt Lawsuit

Mortgage companies are not collection agencies. I advocate fighting collection agencies in court because they are sloppy, unorganized and often have no paperwork to back up outrageous financial claims. This is not the case with mortgage lenders. If a mortgage company sues you, you aren't likely to come out on top.

Stopped paying? Get ready for a lawsuit 

When the second mortgage lender wins its lawsuit, the court gives the company a civil judgment. Armed with a civil judgment, the lender can levy your bank accounts, garnish your wages, seize certain items of personal property and attach liens to other property you own, such a a car or second home. Even worse, the judgment itself is a public record. It appears on your credit report and can devastate your credit scores. Unlike most other negative credit report entries which only remain on your credit report for seven years, civil judgments stick around for the same amount of time that they are enforceable. Depending on the state you live in, a post-foreclosure civil judgment could stick around for a decade or more.

Statute of Limitations for Second Mortgage Lawsuit

Your lender knows that your finances are shot immediately after a foreclosure. Trying to collect from you at this point would likely be futile. You clearly don't have the assets to pay the debt because, if you did, you wouldn't have lost your home. Bank reserves are also at an all-time low immediately after foreclosure.

Does this stop the second mortgage lender from suing you? Absolutely not. It just stops the lender from suing you immediately  The lender wants to collect your defaulted loan balance, and the best way to do that is to hang back and give you the opportunity to get back on your feet financially before snatching the rug out from under you.

How thoughtful.

Every state, however, has a statute of limitations after which you have an airtight defense against your mortgage lender in court. Should the lender sue after the statute of limitations expires, it cannot obtain a judgment against you if you use the expired SOL as a defense in court. At this point, it doesn't matter if you owe the debt or not. All that matters is that the debt is too old and the creditor cannot take legal action past this point.

I'd like to think the lesson in our little cautionary tale is simply this: Avoid second mortgages. Just say no to HELOCs and home equity loans. Run, run, run from using your home to acquire even more debt for things you property don't need in the first place lest your efforts end with a foreclosure.

Related Articles:

Collection Lawsuit Statute of Limitations By State

Make Yourself Judgment Proof

Funds Exempt From Bank Account Garnishment

Can a Collection Agency Sue After the Statute of Limitations Expires?

You can end up in court after the SOL passes.

A debt collection lawsuit is of the most frightening outcomes for debtors struggling with collection agencies. You are responsible for the debt until you pay it, but each state places a limit on the amount of time a collector has to sue you via the debt collection statute of limitations  Unfortunately, the statute of limitations does not provide you with absolute protection, and you could still face a collection agency lawsuit after the statute of limitations passes.

Lawsuits After the Statute of Limitations

When a collection agency sues you, it must send you a summons. The summons notifies you that you're being sued, contains the date, time and location of the hearing and gives you an opportunity to respond and claim a defense. The vast majority of people who are sued by collectors do not respond to their summons. In most cases, this is simply a matter of fear. They either know that the debt is theirs and believe that because the debt is legitimate they cannot fight it or don't know what to do – so they do nothing.

When you don't respond to a summons and claim a defense, the collection agency wins its case by default. Because no one is there to contest their claims, they don't have to prove a thing to the court and the judge awards the collection agency a default judgment.

Don't assume just because the statute of limitations has passed that a collection agency will not sue you. Because so few debtors bother to defend themselves, the collection agency's game of legal roulette has excellent odds. You see, the statute of limitations is an affirmative defense. That means that you can have the case dismissed but only if you bring up your defense in court. If you don't appear in court and defend yourself, the judge has no way of knowing that the statute of limitations on the debt has expired – and the debt collector certainly isn't going to volunteer the information.

Surprise! You Owe a Default Judgment!

The judge doesn't know the SOL expired unless you appear

A collection agency cannot file a lawsuit against you without sending out a summons. You must be notified of the lawsuit. If you aren't aware that a collection lawsuit is underway, you aren't able to defend yourself. If the statute of limitations has already expired on your debt, the collection agency knows that you have an affirmative defense. Thus, its in the collector's best interests to ensure that you never receive a summons.

Collection agencies get away with this in different ways. Some don't mail out a summons at all while some intentionally send the summons to an old or incorrect address (the collection agency can view your old addresses on your credit report). Unless you live in a state that requires you to be served with a summons in person, don't be too surprised to check your credit report one day and find a collection judgment.

Filing an Appeal to Remove Judgment

Although state laws regarding judgment appeals differ, you usually have a set amount of time to appeal a judgment. One of the grounds under which you can appeal is improper service. Because you weren't able to defend yourself in the original hearing, the court may schedule a new hearing and make a new ruling.

You don't have the ability to appeal a collection judgment indefinitely. Most states have a time limit for appeals. Let's say, for the sake of argument, the window of opportunity for filing an appeal is six months. If you aren't aware of the judgment, the collection agency may wait seven months before it garnishes your wages or freezes your bank accounts. Once this occurs, you know without a doubt that the collector has a judgment against you. Had the garnishment occurred earlier, you could have appealed, but the collector has waited just long enough to ensure that you no longer have the right to appeal before enforcing its judgment.

Protecting Yourself After the Statute of Limitations Runs

Got a surprise judgment? Kiss your money goodbye

Your goal in protecting yourself after the statute of limitations runs is to make sure the collection agency can't do anything sneaky to nail you with a garnishment, bank levy or property liens. Subscribing to a credit monitoring service is one way to do just that. I am a big, big fan of credit monitoring services. When anything changes on your credit report or something new gets added, the credit monitoring service will automatically notify you. This prevents the collector from keeping a default judgment a secret until you can no longer contest it. Although the credit bureaus each offer credit monitoring, a third party company that provides you with a tri-bureau report gives you more bang for your buck.

And whatever you do, never ever ignore a summons just because the statute of limitations on the debt has expired. You'll regret it dearly when the collector uses a default judgment to drain you financially and destroy your credit.

Related Articles:

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Can You Reset the Statute of Limitations on a Debt?

Collection Lawsuit Statutes of Limitations By State

Statute of Limitations for a Collection Agency Judgment Lien

We've already talked about the statute of limitations for debt collection lawsuits, but there is another statute of limitations that I don't think I've mentioned yet – the statute of limitations for collection agency judgment liens.

How a Judgment Lien Works

After a collection agency successfully sues you, it receives a court judgment. The court judgment gives a collector rights it did not previously enjoy. One of those such rights is the right to place a lien against your home. Such as lien is often referred to as a "judgment lien" because it is the direct result of a creditor's court judgment against you.

Judgment liens give creditors a security interest in your home

Once the collection agency attaches its judgment lien to your property, it owns a security interest in the property equal to the amount of the judgment. A judgment lien against your real estate (and, in some cases, against your car) secures the collector's previously unsecured debt.

How a Judgment Lien Can Hurt You

While any secured creditor has the right to seize the collateral securing its debt if the debtor does not pay, most collection agencies aren't going to place a lien on your home and immediately move to foreclose. This is because most homes today have mortgages against them. Because the mortgage lender filed its lien first, the mortgage lien has "priority" over the judgment lien. This would force the collection agency to pay off your mortgage if it wanted to foreclose on your house – not something most debt collectors are willing to do.

A judgment lien hurts you not because it gives the collection agency a claim against your property, but because it limits your ability to sell your property to another individual.

Selling a House That Carries a Collection Agency Lien

If you wanted to get strictly technical, you can legally sell your house to anyone you please, no matter how many liens it carries. The liens, however, stay with the property. If your buyer plans to finance his purchase using a mortgage lender, the mortgage lender will conduct a title search, find the judgment lien, and immediately balk.

You'd be hard-pressed to find a mortgage lender willing to loan a buyer the money to purchase your home until the collection agency releases its judgment lien. Remember how I mentioned that the collection agency would have to pay off your mortgage to foreclose on your home because your mortgage is a superior lien? In this case, the judgment lien would be the superior lien. If the mortgage lender ever needed to foreclose on the property, it couldn't do so without first paying off the collection agency's lien.

Selling your home? Think again

But here's where things really come to a head: As soon the collection agency realizes it holds the superior lien on a property, it can foreclose and seize the home no matter who owns it or who the other lien holders are (I'm not including tax liens here. Tax liens are a whole 'nother can o' worms that I do NOT want to open today.). Foreclose wipes out junior liens. Thus, if the buyer's mortgage was for $100,000 and the collection agency's judgment lien was for $5000, the mortgage lender would lose $100,000 over a $5000 debt (In this case it would sue the homeowner, but to a mortgage lender it just isn't worth the risk).

The potential for a big financial mess is enough incentive to prevent mortgage companies from financing home purchases if the home in question carries a lien.

Judgment Lien Statute of Limitations

The statute of limitations for judgment liens is dictated by the length of time a creditor can enforce a judgment in the debtor's state of residence. Let's use California for an example. In California, judgments are valid for ten years. After the statute of limitations passes, the collection agency can still collect on the judgment, but only if the debtor pays the debt voluntarily. The collection agency must also release its property lien.

Now, lets talk about renewal. Most states give judgment holders the right to renew their judgments if the judgment is close to expiring and creditor has not yet collected the judgment. We're still in California, guys. The collection agency has decided, after nine years, to renew its judgment....but the lien still expires on the date the original judgment was scheduled to expire (bear with me, I'm trying to make this as simple as I can).

The collection agency renewed its judgment, but it couldn't renew its lien. The renewed judgment gives the debt collector the right to file a brand new property lien, but it loses the priority of its previous lien. Thus, any liens filed after the collection agency's original judgment lien were once junior liens but, because the priority order did not change for those liens, they are superior to the creditor's claim when it files its second lien after renewing the judgment.

Judgment Statute of Limitations and Lien Laws Vary By State

I was using California law as an example, but the same policies apply in many states. Others do not allow creditors to re-file liens upon renewing a judgment. If you know the statute of limitations for enforcing a judgment has already expired in your state and a collection agency holds a judgment lien against your home, you can demand that the company immediately release its lien and send you written notification that it has done so.

If you're curious about the statute of limitations for judgments in your state, check out this chart from Bills.com: Collection Laws & Exemptions It lists the statute of limitations for both lawsuits and judgments in all fifty states.

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