American Consequences - November 2017

Three Foolproof Ways to Deal With Credit-Card Debt

According to the Gallup polling company, the average American plans to spend more than $900 on Christmas gifts this year. Last year, they only planned to spend $785. That’s one of the biggest-ever annual increases... and the highest spending projection in a decade. If they put it all on their credit cards... they’ll have to add about $75 a month to their regular payments to pay it off in a year, not including interest. But for the roughly 18.5 million households that report only sending in their cards’ minimum monthly payment (say, $25), it will take more than four years and an extra $400 in interest to pay for Christmas... jacking up the bill for their presents by almost 45%. According to the Federal Reserve, the average American household has about $7,500 of credit-card debt. And although only 34% of American households carry over their debt every month, about 15% only make minimum payments. That leads to large debts rolling over and rising interest payments each month. So what can you do if you’re in too deep and can’t see a way out? First, PROTECT YOURSELF FROM HARASSING COLLECTION AGENCIES. All 50 states set a legal expiration date on credit-card debt. In other words, your creditors have a limited amount of time to collect what you initially agreed to pay them. After that, you can simply tell them to leave you alone. They must obey.

This time limit is called the statute of limitations (“SOL”). And in most states, it runs three to six years. Here’s how it works: If you have debt of, say, $15,000 on a credit card that you have not used or paid off, and if you haven’t communicated about the debt with the company within a certain time limit, then the debt is considered expired. And if anyone calls you up about it or tries to collect on the debt, you just tell them “the debt is expired” and hang up. Voila... For all practical purposes, that debt is gone. Note, I said you haven’t “communicated about the debt” with the company. That’s the catch. The statute of limitations starts running from the date of last activity. Again, the rules vary from state to state (and you should definitely research the laws where you live). But essentially, if you have ANY interaction with the company, the clock resets... If you pay off a little bit, the clock starts over. If you call the company and talk to them about the debt, the clock restarts. So if you happen to be in this predicament and the clock has been running, don’t interact in any way with the creditor. If the company threatens to sue you, ask it for “proof of the debt” as this is the only response that doesn’t reset the clock. Once the SOL time comes, the creditor can no longer sue you for the debt. But as I mentioned, the debt still exists – the creditor simply has no recourse to recover it in the courts. And telling it “the debt is expired”

DEBT EXPIRATION: If you have ANY interaction with the

company, the clock resets

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24 | November 2017

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