In 2002 a family member had a auto accident (their fault) and was in a bad financial state. She came to me for assistance because she needed a co-signer. When we went to the dealer co-signing wasn’t good enough because even with my signing her credit was so messed up that her interest rate was through the roof. So I decided to sign as the primary and not use her on the loan. Well fast forward about 1 year, I decide to join the US Army and while in basic training I find out that the vehicle will be repo’d and that she had missed three consecutive payments. So I tried to fix the situation the best I could over the phone however due to my circumstance at the time I wasn’t in a position to clear the issue up as I really wanted. So I phoned a friend who went to her house and picked up the car. He then took the car to the bank, basically a voluntary repossession to avoid any additional charges. The vehicle was sold at auction and after about 6 months the loan showed charge off on my credit report. I have attempted to collect the difference ($6,052) from her but have had no such luck. It’s my understanding that it will disappear from my credit report in approx. 7 1/2 years after the repossession. My question is am I required to pay the balance for it to disappear or will it just go away. The particular financial institution has made no attempt to contact me and according to my credit report it was turned into collections. However on another portion of my credit report it shows no accounts have been turned into collections. I am very confused by this and wish for this situation to leave my life. Should I dispute this or will I be opening a pandoras box?
Originally posted 2009-08-28 10:35:09.
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Every state has a “statute of limitations” on debts. Although the debt exists, once the statute has passed, you cannot be held legally obligated to pay the debt.
Suze Orman has a link to statutes of limitations on debts from her website.
No…don’t dispute it….This is a valid negative entry and disputing it might only trigger aggressive collection activity against yourself.
Technically, a debt collector can come after you forever for defaulted debt…however, once the statute of limitations is up…they’ve lost the power to successfully take legal action.
I believe that a car loan is a “written” contract. You might want to consult your local JAG on your base to confirm this issue.
You can find this time period for your state by going to the link below and looking under “Written Contracts.”
2002 is nearly 7 years ago and bad credit information does disappear, by federal law
(U.S. code 1692 Fair Credit Reporting Act) from
credit reports at 7 years from the time it was charged off. In fact, you read 7 1/2 years because charge offs dates are usually six months after the first delinquency, specifically 180 days. Leave this sleeping dog alone.
Do not attempt to pay any amount on it. If you
violate that, you may start a NEW clock ticking
allowing the debt to be reported for up to 7 years from the time you made a payment, or failed to finish paying off the balance if you start making payments.
Someone made mention of state statute of limitations on collecting debt. Such statutes have nothing to do with the 7 year limit for reporting negative credit items (except 10 years for bankruptcy)
State statute of limitations apply if a creditor
decides to SUE you for a debt. If you are sued
the statute of limitation can be as short as 3 years in Delaware and many southern states, 4 years in California , or as much as Fifteen years
in Kentucky and Ohio on written contracts.
If someone has obtained judgment
( you have to research this, if you have been
served with papers(a complaint for money) and you never responded(filed an answer),
a court can issue default judgment and you may
not know it exists! The service notifying you of
court action is considered the only notice you need in most juridictions)
, that can be reported to a credit bureau as long as the judgment exists and in my state, with judgment renewals, that can extend to
21 {YES TWENTY ONE years}
From the information you’ve presented, I don’t think you have been sued so your credit reporting should disappear after 7 years. If it does not, you should file a dispute with the credit bureau(s) indicating the item is time barred from inclusion in the report. DON’T do this before the full 7 years however.
As a cosigner you have the same rights as a primary in that they are required to send you all of the repo notices that they send the primary.
See UCC § 9.506 and your states repo statutes.
(if you did not sign the little box on the “back” of the contract then you cannot be held responsible for the deficiency)
They may have tried to send you the notices and since you were in basic the notices may not have found their way to you. But, many banks/creditors do drop the ball on that part so they may not have even been sent.
A repo voids the original contract so the deficiency from the sale does not fall under written statutes but rather under UCC § 2-725(2). The collecting SOL for the repo deficiency is 4 years from the date the vehicle was sold that created the deficiency.
Case law for the UCC 4 year SOL – Ford Motor Credit Company v. Gilberto Arce.
One person posted that the collecting SOL is a defense, which it is. But if a debt is past the collecting SOL then the SOL can also be used before any action is filed to inform the creditor/collector that the debt is time barred and their filing suit would be an actionable violation.
You might click on my profile and click on the last link I have listed to a free credit discussion board. Do a search in the Credit Forum under “repo” and read. You will be able to find discussions on how people have handled their repo situations and a link to a very well written repo dispute letter, that is also free to use.
Good luck and thank you very much for your service.