What Is the Statute of Limitations on Debt?

John Hsu
John Hsu
March 26, 2019

  • A debt statute of limitations specifies how much time debt collectors have to file a lawsuit against delinquent debtors.
  • Statutes of limitations for collecting debt vary from one state to another, and they may not apply to certain types of debts.
  • Debtors may still face legal risk after the statute of limitations has run out.

If you fail to pay off your debt, your creditor has a number of remedies available. They may report your delinquent debt to the major credit bureaus so that it will appear on your credit reports and hurt your credit score. They may also send your debt to a debt collector, who may take legal action against you. While the consequences can be dreadful, your unpaid debt may not haunt you forever, because of the statute of limitations for collecting an old debt. Find out how the statute of limitations on debt works.

What Is the Statute of Limitations for Collecting Debt?

Different states have different statutes of limitations on debt. These statutes only apply to certain kinds of debt, and they determine the amount of time debt collectors have to take legal action against defaulting debtors. Once the statute of limitations expires, your debt collector no longer has the right to file a lawsuit against you. Their case will be regarded as “time-barred.”

However, this doesn’t mean that your debt collector isn’t allowed to contact you and request payment from you. Depending on which state you’re residing in, they may be able to write letters to you or call you in an attempt to collect the money you owe them. Nonetheless, if they threaten to sue you after the statute of limitations for collecting debt has passed, they will be violating the Fair Debt Collection Practices Act. While they aren’t required to inform you that the statute of limitations is over, they must tell the truth if they decide to let you know.

What Is the Statute of Limitations on Debt?

How Does the Debt Statute of Limitations Work?

As mentioned earlier, each state imposes its own statute of limitations on the collection of debt. For instance, Maine sets its statute of limitations at six years. If you’re living there, your debt collector won’t be able to file a collection action against you if your last activity on your debt occurred more than six years ago.

In most states, the statute of limitations for collecting debt lasts from three to six years. However, some states may give debt collectors up to 10 years to take delinquent debtors to court. You can seek legal aid or contact the Attorney General’s Office to find out about the statute of limitations in your state.

The clock for the debt statute of limitations starts ticking when you miss a debt payment for the first time. In some states, the clock restarts whenever you make a new payment. Even if you make a partial payment, you may give your debt collector more time to use legal action to collect what you owe. If the statute of limitations is over, but the collector continues to contact you, you can send them a letter to ask them to stop doing so.

What Is the Difference Between Debt Statute of Limitations and Credit Reporting Period?

Your old debt isn’t out of your life for good after the expiration of the debt statute of limitations. A reminder of your outstanding debt may stay on your credit reports longer than the amount of time your debt collector has to file a lawsuit. This is because the credit-reporting period is entirely separate from the debt statute of limitations.

In general, details about late payments, defaulted debts, and other similar derogatory marks will remain on credit reports for seven years. So, if you’re living in a state that has a three-year statute of limitations on debt, your unpaid debt can hurt your credit score for another four years after your collector has lost their right to sue you.

What Happens If Your Debt Collector Sues You After the Statute of Limitations Has Run Out?

If the statute of limitations for collecting your debt has expired, you shouldn’t assume that you’re free from legal trouble. In some cases, debt collectors may decide to file a legal claim despite the fact that it’s technically time-barred. They may try to dispute the time when the clock for the statute of limitations started running or argue that the time limit for collecting debt doesn’t apply.

In such a situation, you should go to court and request a dismissal on the grounds that the case is time-barred per the state’s statute of limitations. If you fail to make your argument, the court may issue a judgment in favor of your debt collector and order you to pay off your debt. The collector can then get a court order for wage garnishment, meaning that money will be withdrawn from your paycheck until your debt is fully repaid.

If your debt collector files a lawsuit against you after the expiration of the statute of limitations, consider seeking the assistance of an attorney.

Can You Pay Your Debts After the Statute of Limitations Is Over?

Even if the statute of limitations for collecting debt has expired and your debt collector can no longer ask you to make payment, you’re technically still in debt. It’s just that the collector is unable to take legal action to enforce debt payment. You can do any of the following:

  • Pay everything you owe.
  • Negotiate with the debt collector to accept a smaller amount than the total owed.
  • Pay nothing at all, though this option can have a negative impact on your credit score.

If you have a very old debt, you should find out about the statute of limitations on debt in your state to determine if a legal claim against you will be time-barred. A proper understanding of the statute of limitations can help you avoid costly lawsuits and stressful situations.

In debt? Solvable can help you understand your options.

 

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