How Long Can Creditors Come After My Debt?!
Debt collectors, whether the federal government or third-party agencies, can be pretty persistent. After all, someone owes them money.
If you have unpaid debt, you may have wondered how long creditors can try to collect it. The answer depends on several factors, from where you live to what kind of debt you hold. The state’s debt statute of limitations outlines the time period that your debt can be collected.
The debt relief attorneys at Robinson & Henry, P.C. want you to be well-informed so you’re in the best position to improve your current situation and protect your future.
This article covers secured and unsecured debt and IRS back taxes.
Secured and Unsecured Debt
Most people have some kind of debt. Maybe you have a mortgage, student loans, or credit cards. These are examples of either secured or unsecured debt.
Secured debt is a loan backed up by some kind of asset. For instance, your mortgage lender can take your home if you default on the loan. Unsecured debt is not guaranteed by any kind of collateral. Credit card debt is the most-widely held unsecured debt.
If you borrow money to pay for something, whether financing a car or swiping a credit card, you enter into a contractual agreement to pay back the loan.
Colorado Debt Statute of Limitations
Each state places limits on how long creditors can pursue debt. It’s called the debt statute of limitations.
In Colorado, debt collectors can sue you for an unpaid debt for up to six years after you default on it.
Don’t expect to be sued right way. Creditors usually make a number of attempts to collect the unpaid debt first.
It’s incredibly important to know what your debt statute of limitations so you can protect yourself and work toward the best solution.
Typical Debt Collection Process
Creditor’s Collection Department
Your creditor will likely use an in-house collector to try to recoup the debt.
Outside Collection Agency
If your creditor’s own collections department fails to recover the debt, the delinquent account may be handed off to a collection agency or a law firm that collects debts for businesses.
Your creditor can also sell your debt to a third-party debt collection agency, often called a debt buyer. The debt buyer then takes over the collection process. The debt buyer wants to collect as much as they can on the purchased debt so it can turn a profit.
Files a Lawsuit
Your creditor or a debt collector may sue you over unpaid debt. This option is usually a final resort.
What to do if You’re Being Sued
Don’t ignore a lawsuit. Doing so will undoubtedly make your situation worse.
The court can enter a default judgment against you for the amount of debt the creditor claims you owe (even if it’s incorrect) if you do not respond to the lawsuit by the deadline. So it’s important to read and respond to the lawsuit.
By reviewing the paperwork you can:
- get the response deadline.
- confirm the debt is yours.
- ensure the collection amount is correct.
A default judgment strengthens the creditor’s means by which to recover the unpaid debt, such as wage garnishment (up to 25%) or liens against your property. The judgment also means you’ll probably have to pay the creditor’s attorney fees and court costs, as well as any accrued interest.
Find a Resolution
The first step is talking with a lawyer. A debt resolution attorney can discuss your options in more detail.
Debt Settlement – This is an option for most unsecured debt, such as credit card debt or medical bills. The debt could be settled with the original creditor or with a collection agency. Typically, it’s settled for a lump sum payment for 20 to 50 cents on the dollar of the total amount you owe.
For example, if your debt is $20,000, the creditor may be willing to settle for $4,000.
Pros: You pay less than you owe. It is best for accounts that do not show up on your credit report, such as medical bills or utilities.
Cons: No payment plans. Your credit score will take a hit. You may have to pay taxes on the forgiven debt because it is considered income.
Bankruptcy – Chapter 7 bankruptcy is the most common type filed. It gets rid of most debts, apart from child support, court-ordered restitution, recently-owed back taxes, and student loans. Some of your assets are liquidated to pay your creditors. Chapter 13 and 11 bankruptcy are other options that can refinance or restructure your debt.
Pros: Resolves most debt. Eliminates old tax debt. Forces creditors to leave you alone. It can save large assets, like your home.
Cons: It stays on your credit for a decade. Not everyone qualifies. It’s a complex process that usually requires an attorney. It’s a public record.
Know Your Rights
Just because you have debt does not give third-party debt collectors carte blanche to use whatever means possible to recover it. The federal Fair Debt Collection Practices Act (FDCPA) protects you against debt collectors from using deceptive, unfair collection practices. It also protects you from harassment and abuse.
Creditors are prohibited from:
- threatening to harm you
- using obscene or profane language
- continuously calling you to annoy you
- make public the debt you allegedly refuse to pay
- advertising debt to coerce you to pay it
Sue for Abuse and Violations
You do not have to tolerate verbal attacks and wrongful actions. You can sue a debt collector who violates the federal Fair Debt Collection Practices Act.
Aggressive debt collection can cause people to become ill, miss work, and incur medical bills.
You may be able to recover:
- damages for emotional distress
- medical expenses
- lost wages
- up to $1,000 in statutory damages
If you win, you can also be awarded attorney fees and court costs. In addition to monetary damages, a court can order injunctive relief. In other words, the creditor has to leave you alone.
Now, you’ll have to prove the debt collector did not adhere to FDCPA rules. So take detailed notes of possible violations, then talk with one of our attorneys. They’ll be able to tell you whether you have a claim.
Get Control of Your Debt Situation
Robinson & Henry, P.C. offers complementary initial consultations. Debt statute of limitations is our expertise. So is helping folks get out of debt. Schedule yours with one of our debt relief attorneys online or call (303) 688-0944.
IRS Debt Statute of Limitations
People owe the IRS back taxes for various reasons. You may be so overwhelmed you’ve thought about just ignoring the situation. Maybe you already have. Don’t. The IRS is persistent.
In fact, the IRS collections department enjoys a lengthy debt statute of limitations. The IRS can collect on your back taxes for up to ten years.
We know the IRS at times is intimidating. But our tax lawyers are trained negotiators. In fact, they’ve successfully negotiated substantial debt reductions. We may be able to help you, too.
Robinson & Henry, P.C. offers free initial consultations with its tax lawyers. Schedule online or call
Your Legal Options for IRS Back Taxes
There are a number of ways to reduce IRS debt. The options available to you depends on your individual circumstances.
Our tax attorneys consider all aspects of your situation to determine a course of action. One of the first things they’ll look for is your CSED date.
When Collection Attempts Expire
CSED stands for collection statute expiration date. In other words, it’s how long the IRS has to legally collect your back taxes. It’s usually ten years from the date the IRS assessed the tax.
The CSED date plays a major part in determining your options. Our tax lawyers will confirm the CSED date’s accuracy before moving forward.
If your CSED date is many years away, for instance, we’ll work to minimize your debt. Now, if your CSED is only months way, your it may be prudent to just wait it out.
Our tax attorneys can assess your best strategy. Let’s look at other IRS debt reduction options.
You may be able to work out a payment plan. This is an option for someone who earns an adequate salary.
In many cases, the IRS wants the taxpayer to pay all of the debt owed, or it may agree to a reduced amount.
Installment agreements have a couple of downsides. First, you can end up paying more. Second, the lien will not be removed until the debt is paid off, and that can take years.
Currently Not Collectible Status
You could take this approach if you have a low income and few, if any, assets. This status only postpones the IRS collection proceedings. It does not eliminate the debt.
The debt statute of limitations will continue to run. However, the IRS can review a case at their discretion, and if the investigator feels the taxpayer is capable of paying the debt it will resume the collection process.
Offer in Compromise
An offer in compromise lets some taxpayers negotiate a settlement. There are a couple of payback options if you reach a settlement. One, you can pay 20 percent of the debt up front and pay the remaining balance over five months. Two, you can pay the amount over two years.
The offer in compromise allows you to reduce your debt, and when you’re done paying it off, the lien is lifted. This reduces the amount of time the lien remains on their credit.
The IRS can accept an Offer in Comprise for several reasons:
Doubt as to Collectibility – If there’s doubt you can fully pay the amount owed the IRS can agree to a compromise. Doubt as to collectibility exists when your assets and income are less than the total debt.
Effective Tax Administration (ETA) – The IRS can accept a compromise hinging on effective tax administration when the debt is not disputed but collecting it would “create economic hardship or would be unfair and inequitable because of exceptional circumstances.”
Doubt as to Liability – Doubt as to liability is based on a claim that the tax obligation was incorrectly assessed. This is less common and more difficult to prove than collectibility and ETAs claims.
The only caveat to the Offer in Compromise is you must make on-time payments and be in good standing with the IRS for five years. That means you have to file accurate, timely taxes.
Robinson & Henry IRS Successes
Debt Reduction: $154,000
An IRS audit cited a couple owed $154,000 in back taxes. Robinson & Henry discovered an error in IRS records. The result: the couple owed nothing.
Outcome: $154,000 reduced to $0
Debt Reduction: $136,000
An unexpected business obligation caused a client to owe the IRS $160,000. The client staved off the IRS for years by being deemed “uncollectible,” but the IRS finally attempted to freeze the client’s assets.
We were able to reach an offer in compromise with the IRS. The client paid off the debt in two years. This option eliminated the IRS’ ability to seek larger payments later.
Outcome: $160,000 reduced to $24,000
Debt Reduction: $59,950
An illness put a client behind on their taxes. Soon they owed the IRS $60,000. The client had limited income and extraordinary medical circumstances.
The best possibility to reduce the tax liability was to obtain an offer in compromise. We focused on the client’s doubt as to collectibility and the federal effective tax administration, two of three reasons the IRS can agree to an offer in compromise. The IRS accepted the offer, and the client owed only $50.
Outcome: $60,000 reduced to $50
Debt Reduction: $56,500
A client faced a $57,000 federal tax bill. Through an offer in compromise, Robinson & Henry got the balance reduced to just $500.
Outcome: $57,000 reduced to $500
Debt Reduction: $18,074
Through a simple phone call to the IRS, Robinson & Henry reduced an elderly client’s $44,300 tax bill by nearly half. The client was able to get onto a payment plan.
Outcome: $44,284 reduced to $26,210
What is the difference between a taxidermist and a tax collector? The taxidermist takes only your skin. – Mark Twain
Mark Twain’s quote offers a little levity to what seems like a hopeless situation. It is possible, though, to escape the IRS’ intimidating hold and emerge to discover a promising future.
Contact Robinson & Henry, P.C. for Debt Help
Life happens. Don’t be embarrassed to seek help to regain control of your financial wellbeing. We know debt statute of limitations. Our debt relief and tax attorneys can analyze your situation and provide you with the best course of action.
Schedule your free initial consultation at (303) 688-0944 or make your appointment online. Let’s use your debt statute of limitations to your benefit.
Past results afford no guarantee of future results; each matter is different and must be judged on its own merits. Facts are those of an actual Robinson & Henry IRS lien cases.