A delinquent credit account is charged-off after the original creditor gives up trying to collect from you. Generally, creditors take the action after you've fallen six months behind. The account is closed, a negative entry is placed on your credit report, and the account is sold to a debt collector, sometimes for pennies on the dollar. Although you no longer owe the original creditor, you're still liable for the debt, and the debt collector can contact you to demand payment.
The Fair Credit Debt Collection Practices Act requires debt collectors to send you a written "validation notice" within five days after first contacting you about a debt. The notice should include the amount owed and the name of the original creditor.
You have the right to challenge the validation letter by making a written request for additional documentation from the debt collector. You have the right to ask for a copy of the original contract that you signed, or a copy of the final statement before your debt was charged off. Once the debt collector provides you with valid documentation, you can assume that he has a legal right to collection from you.
Statue Of Limitations
Debt collectors can pursue you for payment for a lifetime. However, there are statue-of-limitations restrictions governing how long the debt collectors have to sue you in court. In most states the statue of limitations is about six years. Once the statue of limitation expires, any lawsuit brought against you for the debt will be dismissed by the judge if you appear for the hearing and point out that the statue has expired.