Not quite right...
According to the Fair Credit Reporting Act (FRCA), a credit reporting agency CANNOT report a bad, unsecured debt for more than seven years after the last transaction was made. The problem is the reporting agencies do not police themselves and the debtors may not tell them the old report should be dropped. This means it is your responsibilty to monitor all three of your credit reports. If a debt is being reported that is not valid or is older than seven years, you must contact the agency reporting them and tell them to remove it. They will confirm the information with the debtor and if you are correct they will remove it. If they don't they are subject to a civil lawsuit. If the debtor says the info. is correct you'll have to take it up with them. By the way, most debtors report info about once a month. They wouldn't wait 5 years to come back and report it again so it doesn't fall off.
Here's where most people get in trouble. You've got a debt that's say five years old. A collection agency calls and calls and calls saying hey bub pay up. You're finally frustrated enough that you make a token payment to appease them. Guess what, you've just added a transaction to your acount. Now they can continue to report the debt for another seven years. If you hadn't made the transaction they could have only reported it for two more years.
As far as the original question of bad credit or bankruptcy. Bankruptcy looks at your current assets, including your home and equity, and may force you to liquidate certain things. They then take that money and split it among your debtors usually for pennies on the dollar. Basically, they tell the debtors what you can pay and they must live with it. When it's all over you are starting back at zero and legally protected against any further debt obligations from past debtors except for student loans and the IRS. The bankruptcy will stay on your credit report for at least 7 years, possibly 10.
If you chose to simply not pay your debts you also will wreck your credit for seven years. It's tough too. You can look forward to lots of calls from credit collectors although you do have some rights here too. The debtors have the right to sue you for a judgement including legal fees. Once this judgement is placed, it goes on your credit report and if you don't pay it you'll be in contempt of a court order.
Here's the flip side of that though. Most states place a three year statute of limitations on the collections of credit card debts. This means that three years after the last transaction they can no longer take legal action to collect the debt. It can however remain on your credit report for another four years. You can find the statute information for your state by googling the info. The state of jurisdiction is where you currently reside.
So all that being said here's my advice. Do everything you can to meet your financial obligations. Call your credit card companies and try to get the fees taken off, rates reduced and even skip a few months. Make a deal with them to not report the information to the reporting agences. Another thing to keep in mind is that they won't report a debt as deliquent until you are at least thirty days late. And even then if you make a small payment they'll usually not report you.
Bankruptcy is a last resort thing. If it has become impossible to pay your debts you probably have no recourse. Also, don't forget, somehow you're going to have to pay the bankruptcy attorney!
Best of luck to you, trust me, I know how much this hurts. I've been through it all before after two furloughs! The lesson I've learned is that as a pilot you must ALWAYS live well below your means and don't carry any unsecured debt. We also keep at least six months worth of bills in a money market so that if a furlough happens again we are covered at least for a bit. I know, easier said then done.
According to the Fair Credit Reporting Act (FRCA), a credit reporting agency CANNOT report a bad, unsecured debt for more than seven years after the last transaction was made. The problem is the reporting agencies do not police themselves and the debtors may not tell them the old report should be dropped. This means it is your responsibilty to monitor all three of your credit reports. If a debt is being reported that is not valid or is older than seven years, you must contact the agency reporting them and tell them to remove it. They will confirm the information with the debtor and if you are correct they will remove it. If they don't they are subject to a civil lawsuit. If the debtor says the info. is correct you'll have to take it up with them. By the way, most debtors report info about once a month. They wouldn't wait 5 years to come back and report it again so it doesn't fall off.
Here's where most people get in trouble. You've got a debt that's say five years old. A collection agency calls and calls and calls saying hey bub pay up. You're finally frustrated enough that you make a token payment to appease them. Guess what, you've just added a transaction to your acount. Now they can continue to report the debt for another seven years. If you hadn't made the transaction they could have only reported it for two more years.
As far as the original question of bad credit or bankruptcy. Bankruptcy looks at your current assets, including your home and equity, and may force you to liquidate certain things. They then take that money and split it among your debtors usually for pennies on the dollar. Basically, they tell the debtors what you can pay and they must live with it. When it's all over you are starting back at zero and legally protected against any further debt obligations from past debtors except for student loans and the IRS. The bankruptcy will stay on your credit report for at least 7 years, possibly 10.
If you chose to simply not pay your debts you also will wreck your credit for seven years. It's tough too. You can look forward to lots of calls from credit collectors although you do have some rights here too. The debtors have the right to sue you for a judgement including legal fees. Once this judgement is placed, it goes on your credit report and if you don't pay it you'll be in contempt of a court order.
Here's the flip side of that though. Most states place a three year statute of limitations on the collections of credit card debts. This means that three years after the last transaction they can no longer take legal action to collect the debt. It can however remain on your credit report for another four years. You can find the statute information for your state by googling the info. The state of jurisdiction is where you currently reside.
So all that being said here's my advice. Do everything you can to meet your financial obligations. Call your credit card companies and try to get the fees taken off, rates reduced and even skip a few months. Make a deal with them to not report the information to the reporting agences. Another thing to keep in mind is that they won't report a debt as deliquent until you are at least thirty days late. And even then if you make a small payment they'll usually not report you.
Bankruptcy is a last resort thing. If it has become impossible to pay your debts you probably have no recourse. Also, don't forget, somehow you're going to have to pay the bankruptcy attorney!
Best of luck to you, trust me, I know how much this hurts. I've been through it all before after two furloughs! The lesson I've learned is that as a pilot you must ALWAYS live well below your means and don't carry any unsecured debt. We also keep at least six months worth of bills in a money market so that if a furlough happens again we are covered at least for a bit. I know, easier said then done.
