Your debt troubles don’t stop when your creditors charge the balances off as bad debts. Ohio laws offer very little in terms of debtor protection.
Even though defaulted debts can drop off of your credit report after 7 years, you could still be on the hook for the debt in a court of law. Judgments can often blindside Ohio residents who thought that an old debt had been long forgotten. The amount of time that a creditor has to pursue a judgment depends on the type of debt as well as the state. In this case, Ohio law prevails.
Verbal agreements, while difficult to prove, are no longer enforceable following 6 years. Written contracts can be pursued for a full 15 years after default. That means that if a creditor obtains a judgment a week before the 15 year mark and then renews it 10 years later, that single unpaid judgment could ruin your credit and chance of homeownership for nearly 35 years
The statute of limitations for open accounts (credit cards, lines of credit) is 6 years from the date of first delinquency. Debt collectors will typically buy defaulted accounts for 6-14% of the balance, but this is generally more than 6 months after you made your last payment. Sending a single payment to that collection agency will restart the statute of limitations all over again, making payment plans for defaulted accounts truly a last resort.
Promissory notes have the much longer limit of 15 years. This means these debts will not go away easily.
Some savvy collection agencies will buy debts at a small fraction of the original balance when they know that the statute of limitations is about to expire. They know that debtors who were flat broke years ago often have the means to pay later in life. For this reason, older debts can often become a major headache long after you thought they went away. Even expired debts are often pursued by rogue collection agencies, although they lose the right to pursue a judgment once the statute of limitations has expired (assuming you show up to mount a defense).
If you ignore a debt and the collector pursues a judgment, then you really can get hit with a double whammy. Your credit rating will sink, even if you eventually pay the judgment. If the plaintiff can show reasonable cause that you may not honor the judgment, then they may even win court approval to garnish your wages.
These limits apply to Ohio residents who obtained the debt while in Ohio and still live in Ohio. Of course, if other state laws enter the arena, then the waters get much murkier as other states’ statutes of limitations could apply!
Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.
Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.
In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.
Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!
Favorite quote:
"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."
Thomas Jefferson
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