Debt

• In Maryland, the statute of limitation on charged-off debt depends on what type of debt it is. Debt based upon a written contract, oral contract or an open account such as a credit card or other type of revolving debt has a statute of limitation of three years. Debt based upon a promissory note has a statute of limitation of six years. Once the debt ages beyond this period, you no longer have an obligation under Maryland law to pay it.
  
  

Considerations

• Charged-off debt does not disappear. The creditor can try to collect on it, or it can hire a collection agency to collect the charged-off debt on its behalf. Alternatively, the creditor can sell that debt to a collection agency, thus making the collection agency the owner of the debt. A collection agency has the right to add interest to the outstanding debt, even if it was charged off by the original creditor, thereby increasing the amount of debt you owe.
  
  

Consequences

• A charged-off debt can lead to larger financial concerns. Depending upon the dollar amount of the debt, either the original creditor or the collection agency may decide to sue you. If the suit is filed before the statute of limitations on the debt expires and the creditor or agency is successful, the court will enter a judgment against you. In Maryland, the judgment-owner can legally pursue your assets, including garnishing up to 25 percent of your wages. This creates a new time frame for the debt obligation, because a judgment against you has a statute of limitations of 12 years in Maryland.
  
  

Your Credit

• Charged-off debt is a very negative item to have on your credit report. Creditors often charge off a debt once it reaches more than 150 days of delinquency, according to FICO, which also states that one 30-day late payment can drop your score by up to 110 points. The later the payment, the more your score will suffer. Collection accounts or judgments resulting from the charged-off debt will also appear on your report and remain there for up to seven years as well.
  
  

Solutions

• A creditor or collection agency can attempt to collect charged-off debt after the statute of limitation has passed; however, you don't have to pay the debt at that point. The Fair Debt Collection Practices Act gives you the right to send the collector a cease and desist letter that requires the collector to stop contacting you. Mail the letter via certified mail, and once received, the collector cannot contact you about the debt except to notify you that contact has ceased or to inform you of legal action against you. If you're sued for an expired debt, simply appear in court and inform the judge the debt is expired, and the case will be dismissed.