How Long Can A Creditor Come After You in NC??

Many people who have had short sales, hard credit times – are now past all of that, and they are ready to buy a house.  That’s great news!  But, it normally helps, as you are applying for a mortgage, to know how long some of that old credit crud is going to stick on your credit file.

The State of North Carolina limits the time you can be sued for a debt… In fact, all states have their own limits.  Those limits have to do with the KIND of commitment, or Contract you have with the Creditor.In North Carolina the Statute of Limitations are as follows:

Oral Contract: 3 years

Definition: An oral contract is an agreement that was made verbally. No contract was written or signed when the agreement was made. Oral contracts are legally binding, but they are harder to prove in court.

Written Contract: 3 years

Definition: A written contract is an agreement made on a printed document that has been signed by both the lender and the borrower. Written contracts are legally binding and easier to enforce than oral contract.

Promissory Note: 5 years

Definition: A promissory note is a written contract that includes a specific promise to pay. The promissory notes includes the interest rate, repayment schedule, and consequences of default.Open-Ended Account: 3 years

Definition: An open-ended account is an account that has a varying, revolving balance. A credit card is an example of an open-ended account.Okay, so if NC says that there’s a limit to when someone can sue you for a debt, does that mean it’s only on your credit report for that long?  No! You are still OBLIGATED for the debt, they just can’t SUE you.  The only thing that erases your obligation to pay a debt is a cancellation from the creditor, discharge in bankruptcy, or actual payment of the debt. Even after the statute of limitations has expired on a debt, you are still legally responsible for paying the debt. However, the creditor or collector no longer has the liberty of using the court to force you to pay.

This is one of the reasons that debt is being SOLD to companies like NCO and ACS.  They collect a “fee” from the original creditor, they now own the debt, and they have a new statute of limitations.These companies, however, can not keep reporting debt on your credit report past the limitations from the ORIGINAL DATE of the problem.

Let me give you an example… if you had a repossession from 4/2003, with a deficency balance owed of like $4000.  More often than not, Ford Motor Credit (or whoever) did not get a JUDGEMENT against you, they just filed it as a collection.  Starting in 2006 they probably starting selling your $4000 collection to other companies, they then sold it to someone, who sold it again.

Each time the debt was sold, it probably was filed as a new collection.  Fine, new collection as of 12/2006, new collection as of 12/2007, new collection as of 12/2008… but in April of 2010 ALL of those collections HAVE to come off your credit report!

If you are interested in purchasing a home, you need to be working on your credit.  We would love to help you get ready!  Call Steve and Eleanor Thorne, Mortgage Loans Cary , Inc at 919-649-5058.