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

UPDATED: Oct 1, 2022

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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


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 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.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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