Debt Collection Dates That Matter

Key Takeaways
  • When an account becomes delinquent, dates affect credit reporting, the account's value, a creditor's ability to sue for payment, and your ability to receive partial loan forgiveness.
  • Important dates begin with the date of your last payment, which starts the clock for other important milestones.
  • Lenders may report your payment history for up to seven years.
  • Creditors have a limited time to bring legal action against you, referred to as the statute of limitations.

The problem with debt is that it requires you to pay for yesterday’s expenses with today’s dollars, leaving you with less money for the things you need now. When debt balances escalate, it is common to run up more credit card debt to bridge the gap between your living expenses (including debt payments) and income. You tell yourself, if you could just earn 10% (or 20%) more, you would be able to get your finances in order.

When that doesn’t work, you may find that missed payments become inevitable.

Apply for a Personal Loan Today

Choose Your Loan Amount

Another cycle then follows. You get behind on one account, catch it up, only to fall behind on another. In the process, lenders escalate interest charges and late fees, making it even harder to catch up on payments. Before you go another month struggling to pay your bills, learn the debt collection dates that matter with regard to delinquent accounts.

Last payment date: The date of the final payment on the account is typically the date that starts the clock for other significant time limits. Your last payment impacts how long the company can report the delinquency. It could also affect when the company might hire a debt collection agency, sell your account, or take you to court.

Date of last activity: The most recent activity and last payment date are often the same. However, if you contact the creditor, modify your contact information,or make any account changes, it can alter the date of your last activity.

Default date: A default typically occurs after missing two payments. On some contracts, like credit cards, the default date triggers a penalty interest rate, which can be 30% or more. To revert to the original interest rate, you must catchup on the account and make on-time payments for six months. Default interest applies to all outstanding balances and will void promotional rates.

Charge-off date: The charge-off date for unsecured debt is typically 180 days after the last payment. A charge-off is an accounting change for the lender that moves the bill from the receivables to the loss column. The IRS regulates when a company must write off an account as bad debt.

From your perspective, the charge-off date is also significant. After charging off a debt, late fees, interest, and penalties stop accruing. The lender closes the account if it has not done so already. A charge-off also means your account has significantly less value to the lender, making it easier to receive loan forgiveness for a portion of the debt.

Statute of limitations or SOL is the time a creditor can sue in court to force payment on the debt. Each state has a different SOL,ranging from three to 15 years, based on debt type. The clock starts on the date of the last payment. However, you can restart the clock if certain activities occur. For example, making a payment, acknowledging the debt, or discussing payment arrangements could restart the clock, depending on the laws in your state.

Get Help Reducing Your Debt

Choose Your Debt Amount

Credit reporting limits: In nearly all cases, creditors can report your payment history for seven years from the last payment date. Without catching the account up, making a payment could allow the creditor to report the delinquency on your credit file longer.

Many dates significantly affect your account and impact the steps a lender may take to collect. Understanding these dates and how they relate to your situation can provide essential information when dealing with debt collectors.

  • Does debt go away after seven years?

    The seven-year timeframe relates to credit reporting. Creditors may report your payment history for up to seven years. After that time, credit bureaus will no longer show the adverse events, and it will not impact your credit score. It does not affect your legal obligation to repay the debt, the creditor’s ability to sue, or other factors in debt repayment.

  • How long does it take for debt to become uncollectible?

    Every state restricts a creditor’s ability to bring legal action against you through a statute of limitations. Once the debt passes the statute of limitations, the creditor can still make efforts to collect the debt but can no longer use the courts as a means of collection. The statute of limitations can range from three years to 15 years, depending on the type of debt and the account jurisdiction.

  • Can I be forced to pay a 10-year-old debt?

    Aside from a judgment, creditors cannot force payment on debt beyond the statute of limitations, which is less than ten years in most states.