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Dispelling myths about collections accounts on credit reports

Kentucky residents are probably aware that not paying a bill could result in their accounts being sent to collections. Once an account is paid in full, the fact that it went to collections will still remain on a person's credit report for up to seven years and 180 days. However, this doesn't necessarily mean that an individual's credit is ruined for the full seven years and 180 days until it comes off his or her credit report.

For instance, those who live in New York will have paid collection accounts removed within five years of the date filed or last activity. As part of a settlement between New York state and the three major credit agencies, medical debts cannot be sent to collections for 180 days. Medical debts that are in the process of being paid or paid in full by an insurance company must be removed from a credit report.

If an individual doesn't owe the debt in question, it may be possible to dispute it. The Fair Credit Reporting Act requires that credit agencies correct any inaccurate information placed on a credit report. In the event that a person does owe a debt, collection agencies may agree to delete it in exchange for payment on the account. However, debtors should know that this practice does generally go against credit agency policies.

Individuals who are seeking debt relief may wish to file for Chapter 13 bankruptcies. Doing so may allow a person to reorganize secured debts such as a mortgage or car loan without losing those assets. Someone who files for bankruptcy may be entitled to a stay from creditor collection actions. This may make it possible to renegotiate the terms of a loan as opposed to losing an asset through foreclosure or repossession after the repayment period ends.

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