Category: Financial Planners

By Sean A. Kelly

Statute of limitations on debt in California would mean the time period applicable within which a creditor would be able to sue a debtor in the state of California for default on the debt. Once the statute of limitations expires, the creditor would not be able to file a suit against the defaulting debtor to recover losses. Depending upon the type of credit agreement reached between the creditor and debtor, the statute of limitations time period would vary. Under the laws laid down in the state of California with regards to the statute of limitations applicable, any oral agreement, promissory note, written agreement and open accounts and bankruptcy have various statutory time periods. The time period for promissory notes such as mortgage, refinance etc. and open accounts such as credit cards, store cards etc. would be four years. In case of oral agreements where the agreement between the creditor and the debtor might be made orally would be two years and for bankruptcy it would be 10 years. The law states that in case of expiry of the said time period, the debt would become non-collectible and the debtor would not be liable to pay.

According to the Statute of limitations on debt in California, the time duration from which the statute would begin would be the date of last payment or last transaction on the account. Hence when an account goes into delinquency and the debtor does not pay, the same would be reported in the debtor’s credit report. It would be beneficial to remember that a debt would remain to be reported as such till the debt gets paid in full. The only benefit for the application of statute of limitations would be, to give respite to the debtor in case the debtor does not pay within the time frame. After the statute time lapses, the debtor cannot be sued in a court of law.

It might stand one in benefit to understand that when one might be contacted near the end of the statute of limitations on debt, even a verbal acceptance of the debt would reset the time period of the statute and the creditor would now be legally right to sue the debtor. It might be better not to accept that any debt remains payable. The calls that might be received nearing the end of the statute of limitations time might be made by the debt collection agencies which might have bought the debt for very little amount from the actual creditor and might be out to collect the monies. Stating that the statute of limitations has ended when contacted by the collection agent and claiming no pending debts might be useful as the debtor would not be able to sue.

Since the debt does not get erased from one’s credit report and might hamper one’s credit scoring, it might be better to approach a debt help company which might be experienced in handling debt that might be very high for the debtor to pay. A debt relief company might help by negotiating with the creditor on the debtor’s behalf and might be successful in settling the debt payment by more than half. The credit report of the debtor might be affected for the next two to four years. However, at the end of the debt settlement program, one would have a cleaner credit report. The advantage of using debt relief might be that all of one’s unmanageable debts might get settled and one might have more cash in hand to start their financial life on a cleaner slate. It would therefore be beneficial to shop around for debt settlement companies with a credible and reliable track record to employ for handling one’s debt problems.

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By Sean A. Kelly

America’s consumer’s debts are on the rise. The ever-growing number of credit card users is one of many reasons more and more people are in need of some form of debt help. It is also one of the reasons that debt reduction companies are also growing like mushrooms after the rain. These companies are set up to assist people in debt in the attempt to reduce the amount of their debt before it is too late. They often have a working relationship with a lot of creditors. By creating a level of mutual trust, these companies possess the ability to negotiate reducing the debts of their clients with related creditors.

These companies not only assist in reducing existing debts by negotiating with creditors but also provide hands-on advice and counseling for their clients to develop a financially savvier and healthier lifestyle to avoid incurring future debts. Under the watchful eyes of the Consumer Federation of America, debt reduction companies do have the ability to negotiate a reduction of up to 50%. There are several companies who boast of their ability to wrangle a reduction of up to 75%. It is advisable that consumers do not be easily fooled by these promises of miracles and stick to more logically sound solutions rather than expecting a quick escape from their debts.

Sometimes the process is also known as debt settlement or debt negotiation. Whatever it is called, it is your right to ask the question, ‘Will this program help me with debt reduction?’ In order to fully understand what goes on between your advisor and your creditor, you will need to know the entire process from start to end. The process is as follows:

— Advice and counseling

This is the very initial stage where you will be meeting with your debt counselor or advisor to study the extent of your financial troubles. When in discussion with your counselor, you will need to divulge the entire truth and nothing but the truth and come clean about everything to allow your counselor to get a very clear picture of your situation. All records are analyzed and there will be a lot of questioning and investigating. Once the problem is identified, your counselor will come up with several advice and options for you to take on in order to be in charge of your own debts and also to avoid incurring future debts.

— Budgeting

Based on your income and expenses ratio, you and your counselor will work together to come up with a budget that is both realistic and objective. The budget is planned for you to set aside a certain amount of money every month in order to start making payments on your outstanding debts once the negotiations take place. Based on the budget, your counselor will then draw up a timeline that will determine the time it will take for your monthly savings to amount to the figure that your counselor will be negotiating.

— Setting up an account

Instead of making monthly payments to your creditors, the money you are to set aside every month will be deposited into an account and the money will be left there to accumulate until there is enough balance to initiate a negotiation with your creditors. You are not to withdraw the money under any circumstances.

— Negotiation with creditors

You can do the negotiating yourself if you wish but it will definitely be under the guidance of your counselor. You could also let your counselor negotiate on your behalf. It is during this time that your counselor will request that your creditors allow you to reduce your amount of debt by up to 60 or 70%. It is quite difficult to get a creditor to agree to reduce such a significant amount of debt. Typically you will be more successful towards getting the debt reduced to up to 50%.

— Settlement

Remember the money you’ve been setting aside for the past few years? When an agreeable figure has been mutually agreed upon, your creditor will request for your approval before finalizing the lump sum settlement amount. If you agree, you will then have to pay your creditor the agreed amount by using the money you have in your special account. The amount of money you pay will usually be less than what you originally owe.

Debt negotiations are not always the best solution for different kinds of debt. Normally this method is suitable for credit card debt reduction, bill debt reduction and even student loan reduction, provided that the student loan is not insured by the local government. So whatever your financial issue is, you need to make sure if debt reduction is the right path for you to take.

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