I received a call at Steidl and Steinberg from a potential client. It seems that his son was indebted to Discover for over $10,000 and his son is being sued.
The son (we will call him “Sonny”) doesn’t want to pay this debt: it belonged to his ex-wife who used the card exclusively. Sonny has no desire to help her out; further, he has very little money to do so. But here’s the kicker: the debt is over 10 years old. There has been nothing charged for over 10 years, and there have been no payments for 10 years.
You are probably wondering, isn’t there a limit to the amount of time a creditor has to collect a debt in this type of situation? There is, though interpretation of that time varies.
But no matter who’s interpretation you look at, it is highly unlikely that the debt will still be valid after 10 years of inactivity. So if it is not valid, then Sonny is safe, right?
In order for Sonny to win, he actually has to go to Court and defend himself. If he does not respond, he will lose by default. That means he will lose for no other reason than because he did not file an answer. Sonny should hire a lawyer who should defend his position. It will cost some money, but if he doesn’t defend himself, it may cost a lot more.
I recently saw a client who owes about $20,000 in old debt and she is getting calls. The debts are over five years old, and no one is suing her yet. And, it is possible that no one will sue her at all, despite the phone calls.
Better yet, after about seven years of no payments, it is likely that the inactivity will cause the bad stuff to drop off her credit report completely, as if she never owed the debt at all. But that doesn’t mean that she doesn’t owe the debt. It just means that the debt is going to be difficult for the creditor to collect. Of course, the creditor can still sue my client even after the account has dropped off my client’s credit report. And while the creditor may lose the lawsuit because so much time has passed since the account has been active. But if my client fails to defend herself she might see a judgment against her in the mail very soon on a debt that before the lawsuit was really uncollectable.
What is the best way to go here? If my client does nothing and the creditors do nothing else to collect on the debt, my client wins when the debt drops off her credit report. If she waits a few years and gets sued anyway, she in then in the middle of a legal battle that she would rather avoid. In addition, just when she has started to rebuild her credit, she might have to battle the credit reporting agencies when they report the lawsuit at a time when she believed she was clear of that debt.
What is the best decision for you? It’s a crap shoot to wait. The bankruptcy is absolute, plus rebuilding your credit afterward is straightforward and goes quickly. It's your choice. But the best suggestion is to give us a call at Steidl and Steinberg and we can discuss your financial situation.