Key takeaways
- The statute of limitations on debt collection determines the time frame for creditors to legally take you to court.
- Paying or acknowledging time-barred debts can reset the clock, reopening the doors to lawsuits.
- Different types of debt – credit cards, personal loans, student loans, etc. – have varying time frames that differ by state.
Check if you have to pay a debt; you may no longer be required to.
Did you know that you have legal protections when it comes to debts? It’s true. Whether it’s an old bill, a forgotten loan, or a collection notice, laws are in place to protect debtors.
One such law is the statute of limitations. This gives debt collectors and creditors a deadline for suing you over an unpaid account. Once this timeframe has passed, they can no longer take you to court.
This doesn’t mean you’re off the hook. Creditors will still try to recover their money, and your credit score can be affected.
Let’s go over what protections you have and how to use expired debts in your favor.
What is the statute of limitations on debt?
Definition and purpose
The statute of limitations is a legal time limit within which a creditor or debt collector can sue you to collect on an unpaid account. This time frame varies by state and type of debt, typically ranging from three to ten years. These laws aim to ensure that legal actions for debt collection are pursued within a reasonable time before evidence has been discarded or disappeared.
How it works
The clock on the statute of limitations usually starts ticking from the date of your last payment or the last activity on the account. Actions like making a payment or recognizing the debt can reset the timeline, granting the creditor more time to initiate legal proceedings.
After the statute of limitations expires, the debt is considered time-barred. This does not prevent creditors or collection agencies from contacting you, but they can no longer sue.
Understanding time-barred debt
What is a time-barred debt?
Time-barred refers to a consumer debt that has surpassed the statute of limitations, meaning that a creditor can no longer file a lawsuit against you. You still owe the money, but the creditor’s ability to collect is restricted.
How to tell if a debt is time-barred
The first step is to know your state’s statute laws. The statute of limitations clock usually starts running from the moment you miss a payment. Look at your records to determine when you last acknowledged or paid the account. Then, check the laws for your state to see if enough time has passed.
It can be hard. For example, credit card debt statute of limitations typically ranges from three to six years, but the credit card charge-off statute of limitations may differ, as it starts when the account is charged off, not when the last payment was made. It’s important to know these differences and check your state’s laws.
Can a time-barred debt be revived?
Yes, debts can be revived if you take certain actions, such as making a partial payment or even acknowledging that you owe the money. This resets the clock, opening you up to being sued. To avoid this, do not acknowledge it, make agreements with collectors, or start making payments until you are ready to repay the entire amount.
Wondering if you should save or repay debts?
Statute of limitations by debt type and state
How long you have to legally repay old debts varies by state and type of debt.
Debts are split into four categories.
- Open-Ended Accounts: Open-ended accounts allow you to borrow repeatedly up to a set limit. A common example is credit cards.
- Written Contracts: Written contracts are formal agreements signed by both parties—creditor and borrower—outlining the terms and conditions of the loan. Medical debt and car loans are common examples.
- Promissory Notes: Promissory notes are written promises to repay a specific amount of money within a certain time at a specified interest rate. This type of signed agreement is less detailed than a written contract and only requires the borrower’s signature. Common examples of a written promise are private student loans and mortgages.
- Oral Agreements: Oral contracts are informal, verbal contracts where the terms are agreed upon verbally but not written down.
Each state has its own statute laws that vary based on the category of your delinquent debt. It’s crucial to check your state’s specific regulations. For example, the statute of limitations in California for debt ranges from two to four years. Oral contracts are two years, while everything else is four years. The statute of limitations on debt in Missouri is five to ten years; oral contracts and open-ended accounts are five years, whereas written contracts and promissory notes get a whole ten years. Understanding these distinctions is key.
Statutes of limitations for each state by debt types
The table below outlines the different statutes of limitations for each type of debt by state.
| State | Written Contracts | Oral Contracts | Promissory Notes | Open-Ended Accounts |
|---|---|---|---|---|
| Alabama | 6 | 6 | 6 | 3 |
| Alaska | 6 | 6 | 3 | 3 |
| Arizona | 6 | 3 | 6 | 6 |
| Arkansas | 5 | 3 | 5 | 5 |
| California | 4 | 2 | 4 | 4 |
| Colorado | 6 | 6 | 6 | 6 |
| Connecticut | 6 | 3 | 6 | 6 |
| Delaware | 3 | 3 | 3 | 4 |
| D.C. | 3 | 3 | 3 | 3 |
| Florida | 5 | 4 | 5 | 5 |
| Georgia | 6 | 4 | 6 | 6 |
| Hawaii | 6 | 6 | 6 | 6 |
| Idaho | 5 | 4 | 5 | 4 |
| Illinois | 10 | 5 | 10 | 5 |
| Indiana | 10 | 5 | 10 | 6 |
| Iowa | 10 | 5 | 10 | 5 |
| Kansas | 5 | 3 | 5 | 3 |
| Kentucky | 10 | 5 | 15 | 10 |
| Louisiana | 10 | 10 | 10 | 3 |
| Maine | 6 | 6 | 20 | 6 |
| Maryland | 3 | 3 | 6 | 3 |
| Massachusetts | 6 | 6 | 6 | 6 |
| Michigan | 6 | 6 | 6 | 6 |
| Minnesota | 6 | 6 | 6 | 6 |
| Mississippi | 3 | 3 | 3 | 3 |
| Missouri | 10 | 5 | 10 | 5 |
| Montana | 8 | 5 | 8 | 5 |
| Nebraska | 5 | 4 | 5 | 4 |
| Nevada | 6 | 4 | 3 | 4 |
| New Hampshire | 3 | 3 | 6 | 3 |
| New Jersey | 6 | 6 | 6 | 6 |
| New Mexico | 6 | 4 | 6 | 4 |
| New York | 3 | 3 | 3 | 3 |
| North Carolina | 3 | 3 | 5 | 3 |
| North Dakota | 6 | 6 | 6 | 6 |
| Ohio | 6 | 4 | 8 | 6 |
| Oklahoma | 5 | 3 | 6 | 3 |
| Oregon | 6 | 6 | 6 | 6 |
| Pennsylvania | 4 | 4 | 4 | 4 |
| Rhode Island | 4 | 10 | 10 | 10 |
| South Carolina | 3 | 3 | 3 | 3 |
| South Dakota | 6 | 6 | 6 | 6 |
| Tennessee | 6 | 6 | 6 | 6 |
| Texas | 4 | 4 | 4 | 4 |
| Utah | 6 | 4 | 6 | 4 |
| Vermont | 6 | 6 | 14 | 6 |
| Virginia | 5 | 3 | 6 | 3 |
| Washington | 6 | 3 | 6 | 6 |
| West Virginia | 10 | 5 | 6 | 5 |
| Wisconsin | 6 | 6 | 10 | 6 |
| Wyoming | 10 | 8 | 10 | 8 |
After moving, which state’s laws on debt statute of limitations apply?
When you relocate to a new state, the statute of limitations may be determined by the state law where the debt originated, your current state of residence, or the state specified in your credit agreement. The creditor or debt collector will typically choose the state with the longer time period or one that has a history of siding in their favor. All in all, it’s a tricky question. Consult with an attorney for a clear answer and guidance on how to proceed.
Impact on credit reports
The statute of limitations and your credit report are separate issues. The statute of limitations only protects you from being sued after a certain period; it does not affect your credit report.
Does debt leave my credit report after the statute of limitations?
No, the negative mark will remain on your credit report for up to seven years from the date of your first missed payment and will negatively impact your credit score. The statute of limitations may end before the seven years are up, or after they pass. The two have no bearing on each other.
Dealing with debt collectors
When dealing with collectors, it’s important to know your rights. Always verify you owe the money before making any payments. Communicate in writing and keep records of all interactions. This can help you if you’re taken to court.
How often credit card companies sue for non-payment depends on the balance owed and how long you’ve had the delinquent debt. Going to court is costly, so how often debt collectors take you to court may be lower than expected, but it’s still crucial to be prepared. If a collector or creditor takes you to court after the window for legal actions has expired, you have a good defense.
Can a debt collector contact or sue after the statute of limitations period ends?
A debt collector can still contact you but cannot legally sue you.
How does the FDCPA apply to debt after the statute of limitations expires?
The Fair Debt Collection Practices Act (FDCPA) protects consumers from abusive, unfair, or deceptive practices by collection agencies. After the statute of limitations expires, collectors cannot file a lawsuit, but they can still attempt to recover the money.
In their attempts to recover funds, they:
- Must inform you that the debt is time-barred
- Cannot threaten you with legal action
- Cannot mislead you about the consequences of not paying
Knowing your rights under the FDCPA helps protect you from illegal collection practices.
Paying off debt after the statute of limitations
Paying off delinquent debts after the statute of limitations has expired is still an option, and it can be in your best interest. While you are no longer legally obligated to pay an old debt, some people choose to settle in order to clear it from their credit report or for personal peace of mind.
Be aware that acknowledging the account or paying even a portion of it can potentially reset the debt’s statute of limitations. Before making any decisions, consider your finances, consult with a financial advisor, and weigh the potential consequences.
Credit card balance too high?
Should you pay your debts after the statute of limitations expires?
Debts do not disappear. You still owe the money, and it is still a part of your financial history. Repaying the funds will improve your credit score, help you avoid further collection efforts, and increase your chances of securing loans or credit cards with affordable terms. If you cannot pay your debts in full, try negotiating with creditors to accept a smaller amount or ask for a payment plan. Know that in doing so, you will restart the clock.
Frequently asked questions
1. Is there a statute of limitation for court judgments?
Judgment expiration by state varies, but it typically ranges from 10 to 20 years. In some states, judgments can be renewed, extending the collector’s ability to reclaim funds. If a debt collector wins a judgment, they can use various methods to enforce the ruling, such as wage garnishment or levies on your bank accounts.
2. What if I can’t pay a court judgment against me?
You can negotiate a voluntary payment plan or settle for a lower amount. If your situation is dire, filing for bankruptcy can provide relief from unpaid debts, including judgments. This action has significant long-term effects, so it should not be taken lightly. Whatever you do, respond proactively to judgments; ignoring the situation can make it worse.
3. What is the IRS statute of limitations on collection?
The IRS statue of limitations is known as the Collection Statute Expiration Date (CSED). Generally, the IRS has ten years from the assessment date to collect outstanding tax debts. After this period, tax debts are typically considered uncollectible, and the IRS can no longer pursue collection actions. However, certain actions, such as filing for bankruptcy or entering into an installment agreement, can extend the collection timeline.
4. Is there a statute of limitations for collections on student loans?
Yes, but is depends on whether the student loan is federal or private. Federal student loans do not have a statute of limitations, meaning the government can collect indefinitely. A private student loan is typically a promissory note. The statute on promissory notes ranges from three to ten years.
5. What is the statute of limitations on car repossession debt?
The statute of limitations on car repossession debt varies by state. It typically applies to when a lender can sue you for the remaining balance after a vehicle has been repossessed. Check your state’s laws to understand your legal rights and obligations since they differ. For example, the statute of limitations on debt in Alabama is four years, while the statute of limitations for Nevada debt of this type is six years.
Bottom line
The statute of limitations is the amount of time a creditor or collection agency has to sue you over an unpaid debt. Once that time has passed, they can no longer take you to court. However, you still owe the money and they can still try to collect it.
Knowing the time frame for legal action can help you make informed decisions. Remember, you still owe the money, and unpaid accounts will continue to impact your credit score and overall financial well-being. The best course of action is to find a way to repay what you owe.
