Debt Consolidation

Statute of Limitations on Debt

When debt collectors are hounding you over past due debts even as new debts seem to pile up in front of you, it can be overwhelming to try to prioritize which debt comes first. Should you pay off your old debts? Or should you focus on the new debts before they spiral out of control?

The answer to this question may depend on whether the expiration date on your older debts has run out yet. That’s right. The ways collectors can recoup unpaid debt balances are subject to a legal limit called statute of limitations.

The statute of limitations is the number of years that a debt collector can use the legal system to collect a debt. Once the statute of limitations expires, the collector can no longer sue you, freeze your assets, or garnish your wages. The expiration date varies by state and can range from three to 20 years from when you first missed a payment.

In many cases, if the statute of limitations on your debt lapses, it doesn’t make sense to pay back the debt. Instead, you can use your funds to focus on your current financial obligations. This article will help you understand the statute of limitations, and how it applies to your debt in collections.

Table of Contents

What is the statute of limitation on debt
What to do if you’re sued for a debt outside of the statute of limitations
The statute of limitations by state
Which state’s statute of limitations apply to my debt
Is my debt beyond the statute of limitation
When to settle a debt that hasn’t expired
Contracts and the statute of limitations
The statute of limitations for court judgments
Know your rights

What is the statute of limitation on debt?

The statute of limitations governs how long a creditor can sue someone who hasn’t paid their debt. If a creditor doesn’t take legal action before the statute of limitations expires, the creditor has no legal means to collect the debt. It’s now considered a time-barred debt.

Joshua Cohen, a consumer attorney based out of West Dover, Vt., put it this way: “If you have a debt that has passed the statute of limitations, it’s your choice whether to pay. Your creditors can’t sue you. It gets into the difference between a legal obligation and a moral obligation.”

In most states, the clock for the statute of limitations starts ticking once your debt becomes delinquent. A debt is generally considered delinquent the day you miss your first payment. So, if you are trying to determine how “old” a debt is, go back to the last time you missed a payment and count forward from there.

Debt collectors can’t sue you once the statute of limitations is up — but they can still try to collect.


Although time-barred debts can’t be legally enforced, debt collectors may continue to contact you about the debt. And it is within their right to do so. However, they should not be able to take legal action against you to recoup old debts.

What to do if you’re sued for a debt outside of the statute of limitations?

Of course, that doesn’t stop some debt collectors from trying to sue people over old debts anyway. Cohen says he has seen situations where debt collectors sued consumers for time-barred debts and even the judges in those cases did not realize that the statute of limitations had already lapsed. When this happens, it takes a savvy attorney to bring the statute of limitations to the judge’s attention in order for the consumer to win their case.

Request a debt verification letter and check your own records

Send a letter to the debt collector requesting a debt verification letter. That letter should include the name of the original creditor and the original amount of the debt. It’s a good place to start if you aren’t sure where a debt has come from. If the debt ultimately does not belong to you, you should dispute it. If it does belong to you, look back at your old account to find out the last time you missed a payment. That will help you figure out how much time has passed and whether the debt collector has missed their window to sue you.

Answer the lawsuit

Don’t ignore the lawsuit, even if you think it’s not valid. If you ignore the suit and it goes before a judge, he or she may not realize the statute of limitations has run out. And if they rule in favor of the debt collector, they can win the right to garnish your wages or recoup the debt by other means.

Seek legal help

You should answer the lawsuit and you should present the statute of limitations as a defense. Consider getting help from an attorney who is familiar with your state’s laws on past due debts. You can search for a lawyer using the American Bar Association’s Find Legal Aid tool online or through the National Association of Consumer Advocates, which includes lawyers that specialize in consumer protection.

Do not make a payment right away

If you make a payment — even $1 — on a debt that has passed its statute of limitations in your state, then you could unintentionally reset the clock on that debt. And the debt collector will now have a fresh shot at suing you to recoup the debt. They call these “zombie” debts for a reason. To prevent resetting the clock, Jay Fleischman, a New York City-based consumer protection attorney, advises that anyone with time-barred debt should write a cease-and-desist letter to the collection agents. Once creditors receive the letter, they cannot contact you anymore (except to tell you they received the letter).

Paying off old collections accounts may not improve your credit score


Even after the statute of limitations has expired on a debt, an unpaid collection item will remain on your credit report for up to seven years after your first missed payment. Because unpaid debts remain on your credit report for so long, you may be tempted to pay the time-barred debt, hoping to improve your score. However, paying old items in collections will not make those items disappear from your credit report or raise your credit score. For example, the widely used FICO 8 credit score does not differentiate between paid and unpaid collection items. If you have current debts, focus on paying those first. In general, the only reason to pay a time-barred debt is out of a sense of moral obligation.

The statute of limitations by state*

Almost all debts have a statute of limitations. Even the IRS is subject to a 10-year statute of limitations on uncollected income tax. But, there is one notable exception to the statute of limitations rule. Federal student loan debt does not have a statute of limitations. The government can sue you for unpaid Direct Federal Student Loan Debt and Federally Guaranteed Student Loan Debt at any time.

Below, you’ll find a list of six different types of debt and the statute of limitations on each time for each state.

Which state’s statute of limitations apply?

Let’s say you took out a Macy’s credit card in your home state of Texas. You racked up $500 worth of purchases and then fell on hard times, unable to make payments. More than four years later, you’ve moved to Ohio and the debt collector who owns that Macy’s credit card debt won’t stop hounding you for payment. In Texas, where you originally took on the debt, the statute of limitations on that debt would be just four years, meaning the debt collector shouldn’t be able to sue you for the unpaid debt any longer.

But you now live in Ohio, where the statute of limitations on unpaid credit card debt is twice as long — eight years.

Which statute of limitations reigns supreme here — the state where you originally took on the debt, or the state where you live now?

This is one of the most common questions consumers have about old debts.

In most cases, Fleischman said, “creditors will normally file suit against you in your current home state.” Creditors have a practical reason to file lawsuits in the state where debtors live, he argues. They want to be sure that the court can force the borrower to pay. Creditors can only garnish wages or put a lien on property in the state where they won the suit. If the debtor lives in another state, and the creditors win a judgment in their previous home state, they have to go through the costly hassle of getting that judgment enforced in a different state with different laws.

Is my debt beyond the statute of limitation?

Unfortunately, it’s not easy to know whether a collection item has expired. In most states, the clock for the statute of limitations starts ticking when you made your last payment. You have to compare the date of your last payment to the current to see how much time elapsed since the debt became delinquent. If the amount of time you calculated is more than the statute of limitations in your state, the statute of limitations has probably run out on the debt. But remember, making even a partial payment on the debt or a promise to pay the debt could reset the statute of limitations in some states (more on oral agreements below)

Not sure where to get information on your last debt payment? You can pull your credit report from annualcreditreport.com to see when you made your last payment on the debt. A collection item will remain on your credit report for seven years (even time-barred debt remains on the report).

A debt collector may contact you about expired debt. When that happens, ask the collector if the debt is expired. According to the Federal Trade Commission, by law, a collector who chooses to answer must answer truthfully. If they choose not to answer, you can send a letter disputing the debt and asking the collector to verify whether the statute of limitations ran out.

In some cases, a collector may sue you for expired debt. If you receive a lawsuit regarding a debt that you think is expired, do not ignore the suit. You need to present the statute of limitations as a defense in your suit. If you’re facing a lawsuit, contact your state’s Attorney General’s office or a lawyer from the National Association of Consumer Advocates for help.

Paying off old debts

In most cases, you should not try to pay off any debt in collections unless you can meet all your current financial obligations. That means new debt and new bills need to take priority over all debts in collections. Paying your current bills and debts on time will help you build credit eventually. It will generally keep you moving forward financially. Once debt ends up in collections, it has already done all the damage it can do to your credit score. Over time, the damage to your credit score will lessen. In many credit-scoring models, paying back debt in collections will not help you regain points (especially compared with the positive effect of paying current debts).

Do not pay off expired debts.

If you have expired debt, paying it back should be the last thing you do with your money. A collector cannot win a suit against you, and the debt has already done all the damage it can do to your credit score. Paying back an expired debt will not help you move forward with your financial life.

Debt collectors may contact you about a time-barred debt, but you should not agree to pay it. These so-called zombie debts (expired debts that seem to have come back to life) cannot be enforced by law. Collectors will not win a suit against you. In most cases, the best course of action is to send the collectors a cease-and-desist letter. In the event that the collector sues you, do not ignore the lawsuit. Instead, present the statute of limitations as a defense to the suit. A lawyer can help you prepare the defense.

Some people will want to address zombie debts out of a sense of moral obligation. Again, it’s critical that this remains a financial priority below paying your current bills. Only choose to repay a zombie debt if it won’t put you in precarious financial position.

When to settle a debt that hasn’t expired.

Under some circumstances, you may want to consider paying off old debt that hasn’t expired. If you have extra cash after paying all your bills and your current debts, you may decide to negotiate a debt settlement. Negotiating a settlement for debts in collections won’t help your credit score, but settling the debt will keep a collector from suing you in the future.

Unfortunately, negotiating a settlement means you’ll need to speak to your debt collector. This isn’t always an easy option. Fleischman says that many people feel emotionally traumatized by talking with debt collectors. If talking to a collector makes you squeamish, Fleischman recommends sending a cease-and-desist letter instead. This means a collector can’t contact you unless they file a suit against you.

On the other hand, people interested in negotiating should accept calls from collectors and listen to the offers they make. While negotiating, do not make a promise to pay or make a partial payment until the agreement is sent in written form. Anyone with multiple debts in collections should work on settling the more recent collection items before dealing with the older debt.

Contracts and the statute of limitations

Most debts have a statute of limitations, but the statute that applies may vary based on the type of contract you used. If you’re trying to figure out the statute of limitations on your particular debt, you’ll need to start by understanding the contract that governs the transaction.

These are the six major contract types:

Oral agreements

An oral agreement is a spoken agreement to pay money based on certain terms and conditions. In most cases, an oral agreement is tough to legally enforce since it’s not documented. However, you should be very careful when speaking to a debt collector. A promise to pay a debt could be interpreted as a new oral contract.

Written contracts

Written contracts are signed agreements that outline certain terms and conditions, and they have specific payment date agreements. Most bills (such as medical bills, cell phone bills, cable, etc.) and many debts (including personal loans and private student loans) are written contracts.

Retail installment sales contracts

Retail installment sales contracts are debts that are governed by the Uniform Commercial Code. Payment plans for furniture or other goods are retail installment sales contracts. If you take out a car loan from a dealership, it is likely to be a retail installment sales contract that the dealership assigns to a bank or financing company.

Promissory notes

Promissory notes are written contracts where one party promises to pay another party money. In some states, promissory notes are held to a longer statute of limitations than other written contracts. Most mortgage loans are promissory notes.

Open-ended accounts


Credit and retail card accounts are often considered open-ended accounts (also called running accounts). Since these accounts don’t have defined payment dates, the statute of limitations that applies to them may be different than for other written contracts.

Contracts under seal

A contract under seal is a contract that has either a wax seal or the word SEAL in the signature line. Contracts under seal are often held to a longer statute of limitations than other contracts.

The statute of limitations for court judgments

If a collector wins a lawsuit against you, the statute of limitations on debt no longer applies. Instead, a new clock, the statute of limitations on court judgments, starts ticking. In every state, a creditor has a limited period of time to collect a judgment against you. During this time, the creditor may have the right to garnish your wages, put a lien on your property, freeze your assets, or take your assets (including the cash in your bank account).

Once the statute of limitations on the judgment has passed, the creditor can no longer take action to collect the judgment. The statute of limitations on judgments varies by state, and in some states, it is easy for collectors to renew the statute to continue collecting against the judgment.

When a collector wins a judgment, he or she may have the power to garnish wages, place a lien on your property, or freeze your assets for many years. Because judgments carry so much power,  it usually makes sense to make arrangements to pay. It can be difficult to get ahead financially with a judgment hanging over your head. If you can’t pay off a judgment right away, you may be able to negotiate a payment schedule. By setting up a payment schedule, you can pay the amount you owe without too much harm to your financial life. Another option to pay is with a debt consolidation loan. You can read more about those here.

Know your rights

If a creditor contacts you about a debt that you believe is expired, you have the right to directly ask the collector about the statute of limitations. Collectors who answer your question must answer truthfully. When you know that a debt is time-barred, it makes sense to send a cease-and-desist letter to the debt collector. Once the collector receives the letter, they cannot contact you anymore.

An unpaid collection item will remain on your credit report for seven years, but you don’t need to hear from collectors during that time.

If a collector sues you, you can get help from a lawyer. Some legal aid lawyers provide help for consumers, and the National Association of Consumer Advocates has a registry of lawyers who specialize in consumer debt.

 

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