Loans and other borrowing products are subject to statutes of limitations.
That means a lender cannot pursue you through legal action to recoup a debt after a maximum amount of time has passed. In Illinois, that limit is ten years for a loan with a written contract or agreement and five years for any borrowing without a formal document, including credit card balances.
The Phenix Group specializes in credit repair in Chicagoand can provide further guidance–whether you are unsure whether you have an aged debt that remains payable or need credit dispute letters that work–and preclude a debt collector from chasing a repayment.
Creditors can chase borrowers to try and collect unpaid debt for an unlimited time. Still, the statute of limitations prevents them from taking legal action or pursuing a court judgment after five or ten years. Litigation means the creditor has access to enforcement methods and a court order to repay, whereas other debt collection approaches may be unsuccessful.
Can collection agencies sue you in Illinois past the statute of limitations? No, but the countdown to the debt becoming uncollectible begins on the date of your first default, not the date at which you first take out the loan.
If ten years (or five in the case of an unwritten debt agreement) have passed, the debt collector cannot begin litigation or use the court system to force you to pay. The statute works slightly differently for secured loans, which have a time cap of four years.
It is advisable to contact an experienced credit repair provider if you believe an unpaid debt may still be collectible and are concerned about improving your credit position while avoiding legal action.
The best way to tackle potential legal action to recover collectible debts is to consider a repayment plan or another structure to keep your creditors happy and ensure you steadily improve your credit report while meeting your obligations.
Much depends on your circumstances, the nature of your debt, and when your loans first originated, but options might include the following:
Debt management plans to reduce or cap interest rates on debts while you make regular repayments
Consolidation loans, where you borrow at a lower interest rate, repay all debts and pay off the loan gradually
Debt settlement programs, where you agree to repay a certain proportion of the debt, with the balance forgiven
Taking steps to resolve debt recovery issues before you face legal action is preferable to ignoring the problem because a court order will appear on your credit report for several years and could exacerbate existing low credit scoring.
Illinois has stronger laws around debt collection than many other states and consumer protections that exceed the federal regulations set out in the Fair Debt Collections Practices Act. Federal laws allow courts to order wage garnishments up to 25%, where the court instructs the creditor to take automatic payments directly from your payslip.
However, this debt repayment method in Illinois is limited to 15%. Individuals who earn below the state minimum wage for forty hours of work are protected from wage garnishments.
Be sure to reach out to The Phenix Group if you would like further information about repairing your credit report while managing existing debts–whether uncollectible or still within the statute of limitations.
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