Loans in Phoenix

Loans in Phoenix: What is the Statue of Limitation on Debt?

Having debts or loans in Phoenix can be a real pain in the neck. Perhaps you made a mistake, forgot about a bill or you have had a debt last quite a long time. If you live in Phoenix and are worried about your debt, you might be wondering about the statute of limitations with your debt.

The good news is that there is a statute of limitations with regard to your debt in Phoenix. According to HB 2412, “In Arizona, the statute of limitations for a contract in writing is six years after the cause of action accrues, or within six years of the date the contract went into default (Arizona Revised Statutes (A.R.S.) § 12-548).”

This means, you have six years to wait until a debt falls off of your credit report. The bad news, is that six years is still quite a long time. You also have to consider some things that the statute of limitations doesn’t cover:

Time-barred Debt doesn’t mean you’ll be left alone – So let’s say the time runs out on your debt. This debt is now called a “time-barred” debt. The collection agency can still contact you and bug you for the debt. They just can’t sue you for it.

Therefore, reaching your statute of limitations doesn’t make your loan magically go away, it just means you are protected from being sued.

You can accidentally restart the clock – No matter how close you are to the end of your statute of limitations on your loan in Phoenix, you can accidentally restart the clock by making a past due payment.

For instance, let’s say you have a personal loan that you stopped paying in 2011. The statute of limitations should be in 2017, but if you make a payment in 2015, then the clock can start all over again. It now makes the statute of limitations end in 2021.

Student loans have no statute of limitations – Do you have a federal student loan? If so, then there is NO statute of limitations (in any state). Collectors will always be able to collect on a student loan. This debt also never goes away if you end up filing for bankruptcy. It is best to always pay your student loans, no matter how little you can afford.

Private student loans, however, are different. Most of them fall under the 6 year statute of limitations. Keep in mind that trying to dodge your debt is just never a good idea.

Why should I pay back my loan in Phoenix vs. letting it go?

You should never go into debt with the intention to not pay it back. Letting go of debt should only be for extreme cases of hardship. Here is what might happen to you if your loan in Phoenix goes unpaid.

  1. Bad credit
    The biggest default of not paying your debt is ending up with bad credit. Even one late payment can show up as a derogatory remark on your credit report.Living with bad credit is very limiting for you. Imagine not being able to buy a home, rent an apartment or even sign for a cell phone contract.As mentioned above, you can also be sued within the statute of limitations. Do you want to end up in court? Probably not, but you can even have your tax return money garnished.
  2. Bad debt to income ratio
    Not only will your credit score suffer, but good luck trying to buy a home or anything else for that matter. Your credit score is not the only thing a lender looks at. They will also see the amount of debt you have in regard to your income to determine your eligibility.
  3. Say goodbye to your car
    If you have a secured loan, such as an auto loan, then you have put up your car as collateral. This means that if you default on this type of loan, your lender can take your car from you.
  4. Higher interest rates
    Let’s say you only have one or two derogatory remarks on your credit report, that still puts you in a pickle with interest rates. Consumers with great credit scores tend to pay little to zero interest on their credit cards. With bad remarks, you can expect to pay some of the highest interest rates a lender can dole out.

Bottom Line
It is good to know your options for your loans in Phoenix. It is smart to know what your statute of limitations is so you can decide how to handle your debt. Keep in mind that there are far more advantages to making an effort to pay off your loan than to try to hide from them. There are even debts that you absolutely cannot hide from. Keep your credit score high and make a repayment plan sooner than later.

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