Is it legsl for a collection agecy/insurance company to leave a loan open?

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Is it legsl for a collection agecy/insurance company to leave a loan open?

About 4 years ago, my loan was delinquent by 2 months due to a layoff. When I went in on the 3rd of the month, the credit union said it was closed and was sent to collections. It’s been almost 4 years and finally the collecters sent me a bill but my loan is still open. It was missing for 3 years and all I got was excuses and lies. Is it legal for this to happen? Can a collection agency and a credit union leave a personal loan open and not charge it off or close it?

Asked on September 12, 2018 under Bankruptcy Law, Hawaii

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Yes, there is no requirement for anyone who is owed money, including a collection agency and/or credit union, to ever close or charge off a delinquent loan or debt; they can leave it open indefinitely, and look to collect from the debtor (i.e. you) at some later date. In your state, someone can sue to recover a debt--that is, take legal action to recover it--for up to 6 years (there is a 6-year "statute of limitations"). That is, for all practical purposes, how long they have to try and force you to pay (e.g. sue you). If you defaulted on the loan 4 years ago, they are still in time.


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