Many people find themselves in debt at some point in their lives, whether it’s from student loans, credit cards, medical expenses, divorce, personal loans, or other types of accounts. Here are some common questions you may have about debt.
Will my debt ever go away?
An unpaid debt never truly goes away. After seven years, it will no longer appear on your credit report, meaning you may see an improvement in your overall credit standing. Negative marks are removed from your report after seven years while accounts that are in good standing remain forever.
When a debt is no longer listed on your credit report, it doesn’t mean a collector can’t still take legal action against you. Some states have a statute of limitations on debt collection. If the statute of limitation has passed, the creditor can no longer get a judgment against you. However, an unpaid debt is always owed until it’s paid in full.
What if I can’t afford the minimum payments?
Many people have difficulty making bill payments at some point or another. If you can’t afford the minimum payment on your account, don’t just skip the payment that month. Skipping a payment will make it even more difficult to catch up the following month. Creditors can also report late or missing payments to the credit bureaus, meaning your credit will take a hit.
If you can’t afford to pay your bill, contact your creditor to see what your options are. Some creditors may extend the due date or waive the late fee. If you can’t work something out with the creditor, do your best to make up the missed payment as soon as possible.
Can the creditor repossess my belongings if I’m in debt?
There are limits as to what a creditor can and can’t repossess when you’re behind on your payments. In some loan agreements, property or possessions are listed as collateral in the terms of the loan. This means that the creditor can repossess the property or possession if you don’t meet the loan agreement’s requirements. The most common types of collateral are vehicles in auto loan agreements or homes in mortgage agreements.
If you have credit card debt, the creditor can’t repossess the items that you purchased with credit. However, a creditor can sue you to recover money if there is no collateral listed in the agreement.
Am I responsible for my partner’s debt after we get married?
Whether or not you’re responsible for your spouse’s debt depends on the state you live in. In community property states, both spouses are responsible if the debt occurs during the marriage. In common law states, each individual spouse is generally responsible for his or her own debt. You can find more information in this article from Nolo.
What happens to debt when someone passes away?
Everything a person owns at the time of his or her death is referred to as their estate. The assets of the estate are used to pay off any debts. If the assets of the estate aren’t enough to cover the debts, a family member may become financially responsible depending on the type of debt. NerdWallet outlines what happens to certain types of debt when someone passes away.