Statute of Limitation

Statute of limitation for the debt is the time limit by which a creditor needs to file a lawsuit against the debtor to recover the debt. If the creditor does not make any attempt within the SOL period, he loses the right to claim the debt from the debtor. This statute of limitation period depends on the nature of the debt, and starts after six months from the date the debtor first becomes delinquent and may continue from 3 years to 10 years. The nature of debt agreements are of 4 types – oral contract, written contract, promissory notes and open ended accounts.

Oral contract – It is a verbal contract between the creditor and the debtor and is considered to be legal if the contract can be proved in the court

Written contract – Under written contract, you need to sign a loan application form and must agree to the terms and conditions of the loan. Mostly car loans and personal loans fall under written contract agreement.

Promissory notes – A promissory note is like a written contract. However, under promissory note the scheduled payments are pronounced on the note. Mortgage loans are a part of promissory notes.

Open ended accounts – Open ended accounts are those agreements which include revolving lines of credit such as a credit card debt.

Statute of limitation is an important instrument for the debtors to protect themselves from the creditors. If the SOL has expired, the debtor need not pay back the debt although the negative listing will stay in the credit report for seven years from the date of delinquency. If the creditor knows that the SOL in his state has expired, he can tell the creditor that he has an absolute defense because he is aware of the fact that the SOL has expired, if the creditor calls him up and asks him to repay the outstanding debt. However, one should always keep in mind that if the statute of limitation has expired and still he makes a small payment to the creditor, the SOL rewinds and the creditor again recovers the right to sue you to the court and bring judgment against you to recover the debt. So before any payment on your past outstanding debt, one should always check whether the SOL has expired or not.

Piggybacking

Piggybacking is a process by which a person who has a good credit score can help another person who does not have a good credit score to boost his/her credit score. This is done by making the latter an authorized user of the credit card of a person who has a good credit score. This process has been in operational for many years, whereby parents who want their children to build up their credit score, add the name of their children as authorized user of the credit card they hold. Now the parents try and make up regular payments on these credit cards and repay the debt on time. This repayment history not only got reflected on the parent’s credit report, but also got reflected in the credit report of the children, thus enabling their children to build up a good credit score or the FICO score.

Though Piggybacking has a positive impact for building up a credit score for children by their parents, it has always been misused by people fail to pay back the debt on time. Since delinquency gets reported in the credit report and lowers the credit score, these people use to take help from private companies, who used to add bad credit consumers to the credit cards of people with good credit history for a fee, without giving them the right to use or even see the credit card. This simple authorization was enough to boost up the credit score.

This system of piggybacking therefore posed a difficulty for the creditors to judge the creditworthiness of a borrower because a person who is applying for a new line of credit with a good credit score may not have a good repayment history as he is using the credit history of the primary credit card holder to increase his score. To help the creditors to get out of such situation, Fair Isaac has developed a new FICO 08 scoring model which would bar piggybacking. As per the new FICO 08 algorithm only primary user’s credit report should reflect his credit history and it should not be reflected in the credit report of the authorized user. This has both a positive and a negative side. On positive side, it would be easier for the creditors to judge the creditworthiness of the borrower because the credit score of the borrower would reflect his own credit history and on the negative side, it would be very difficult for the parents who has been building a credit history for their children, can no longer do so. Instead these parents have to provide their children with a secured credit card and train their children the secured ways to use these cards so that they can build up a good credit score.

Economic Stimulus payment

Economic Stimulus payment is basically a rebate by the Federal Government which will be available to 130 million US households. The US Government has started sending this cash rebate from the month of May 2008. The amount of rebate depends on your income level. Each eligible individual may get a cash rebate ranging from $300 to $600 while each married couple who has filed tax returns jointly may receive the rebate ranging from $600 to $1200. In addition to this you may receive $300 for each qualifying child you have. Moreover, the individual must have a valid social security number and must not be claimed as dependent on anybody’s tax return. Qualifying child includes sibling, adopted child, nephew, niece or your own child who must have completed 16 years of age and has a valid social security number and is dependent on you as per your income tax return.

Now if you have already filed your income tax return for the year 2007, the IRS will automatically send you a check for the amount you qualify for the rebate. However, if you have not filed the tax return for 2007 yet, you should do it by 15th Oct 08 to avail Economic Stimulus payment. However, if you do not generally file a tax return but you think that you are eligible for this stimulus payment, you need to fill up form 1040A and write “Stimulus Payment” on it. This rebate is non taxable and will be treated just as any other tax refund.

For more information on Economic Stimulus payments you can visit the IRS website or call them at 1-800-829-1040.