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Contrary to popular belief, the idea that there is a “seven-year rule” when it comes to personal debt is unfortunately a myth.

It is a commonly-held misconception that after seven years of holding debt from a loan, unpaid bill or other financial product, the debt will wipe and you’ll be debt-free once again. This is not the case.

It is true, however, that a lot of negative financial items will no longer appear on your credit report after 7 years. These include:

  • Late payments;
  • Charged-off accounts;
  • Chapter 13 bankruptcy.




Key Facts and Stats About The “7-Year Rule”


  • According to financial experts, the percentage of Americans in debt is around 80%.
  • 8 in 10 Americans have some form of consumer debt, and the average debt in America is $38,000, not including mortgage debt.
  • Although debt doesn’t just disappear after 7 years, the Fair Credit Reporting Act states that some negative items are removed from your credit report after this length of time, including late payments, charged-off accounts and Chapter 13 bankruptcy.
  • However, some other negative items, such as unpaid tax liens and Chapter 7 bankruptcy, can remain on your credit report for more than seven years.


What Happens to Debt After 7 Years?


Whilst it is not the case that any unpaid debt will just disappear after seven years, it is true that the seven year mark does hold some significance in providing you with some financial relief.

According to the laws set by the Fair Credit Reporting Act, a lot of negative financial items have a sort of ‘expiry date’ on your credit report after seven years. More specifically, items such as late payments, charged-off accounts and Chapter 13 bankruptcy will no longer appear on your credit report.

What this means is that, for example, if a lender were to carry out a credit check on you seven years after you took out a loan in which you were late on some of the repayments from a different lender, the new lender wouldn’t be able to see this information.

However, certain other negative items, like some judgments, unpaid tax liens, and Chapter 7 bankruptcy, can remain on your credit report for more than seven years.


Does Bad Credit Get Removed After 7 Years?


When carrying out a credit check, there will always be a date of entry to show when the financial item first came up on your report. Therefore, by carrying out a simple credit check on yourself, you will be able to see for yourself when any valid negative items are scheduled to be deleted from your credit report.

When the seven years is up, the credit bureaus should automatically delete outdated information without any action from you.

However, if there’s a negative entry on your credit report and it’s older than seven years, you can dispute the information with the credit bureau to have it deleted from your credit report.


Is Debt Cleared After 7 years?


No, the actual debt doesn’t get erased after seven years, particularly if it’s unpaid. You still owe your creditor even when it’s too old to be included in your credit report.

Because the debt still exists, creditors, lenders, and debt collectors can still use the proper legal channels to collect the debt from you. That includes calling you, sending letters, or garnishing your wages if the court has given permission.

You can even be sued for a debt if your state’s statute of limitations for that debt is more than seven years.




Does the 7-year Period Start Over?


In short, the seven-year clock will start ticking on the first date you miss a payment. The good news here is that the seven-year time period for negative information does not start over, even after you bring your account current or pay off the balance.

For example, let’s say you took out a loan in April 2015. You missed a payment which incurred additional fees, but were able to settle it a few weeks later. By April 2022, this late payment notice should no longer appear on your credit report.

Additionally, when the negative items fall off your credit report, it also improves your chances of getting approved for new credit cards and loans, assuming there’s no other negative information on your credit report.