What Is The Statute Of Limitations On Debt


What Is The Statute Of Limitations On Debt?

If you have old debts that you haven’t paid, you may be wondering how long those creditors can legally come after you to collect. This is determined by something called the “statute of limitations” on debt. Basically, creditors have a certain number of years to sue you for unpaid debts – after that time period passes, they’re out of luck. The statute of limitations varies by state and by type of debt. We’ll break it down for you here so you understand your rights when it comes to old debts.

What is the statute of limitations?

The statute of limitations sets a time limit for a creditor to file a lawsuit against you to recover the money you owe. The clock starts ticking on the date of your last payment or last account activity. Once the statute of limitations period ends, the creditor loses the ability to sue you for the debt. This doesn’t mean the debt goes away – you technically still owe it. But the creditor can’t successfully win a lawsuit against you to collect once the time limit is up.

How long is the statute of limitations on debt?

The statute of limitations time period varies by state and type of debt. For example:

  • Written contracts – 4-8 years in most states
  • Oral contracts – 3-6 years in most states
  • Promissory notes – 5-15 years in most states
  • Open-ended accounts – 3-6 years in most states

Some key debts and their common statute of limitations:

Credit card debt 3-6 years
Medical debt 3-6 years
Personal loans 3-6 years
Auto loans 3-6 years
Mortgages 6-15 years

Check out this state-by-state list for the statute of limitations on different debts in your state. It can vary quite a bit!

What happens when the statute of limitations runs out?

Once the statute of limitations clock runs out, creditors lose the ability to sue you for the debt. But that doesn’t get rid of the debt – you still technically owe it, even though they can’t force you to pay through the court system. The debt still exists, and could potentially impact your credit score and history. Debt collectors may still attempt to get you to pay through letters, calls, etc. – but you can no longer be sued.

Can I use the statute of limitations to avoid paying?

You can potentially avoid lawsuits from creditors once the statute of limitations expires, but that doesn’t make the debt go away. The creditor could still report it on your credit report for up to 7 years. That could hurt your credit score and make it harder to get loans. So while you may be able to avoid legal action after a certain period, the debt will stick around. Many people see the statute of limitations as a way to “get off the hook” for old debts. But ethically, if you incurred a legitimate debt, you should make an effort to repay it within your means, even if you legally can’t be sued. Ignoring debts for years then claiming the statute of limitations isn’t the most honorable approach. Work in good faith with creditors on payment plans if possible.

How do I know if the statute of limitations has expired?

It can be tricky to determine exactly when the statute of limitations runs out on a particular debt:

  • Get your full credit report – this should include the date of your last payment or account activity for most debts. Compare this to the statute of limitations in your state.
  • Ask the creditor directly for the date of your last payment or account activity on record.
  • Consult the public records in your state – lawsuits, judgments, and liens against you should be publicly recorded.

If you’re unsure, it may be worth consulting a lawyer to review the situation. Don’t just assume an old debt is past the statute of limitations – make sure to verify.

What should I do about old debts close to the statute of limitations?

If you have old debts that are getting close to exceeding the statute of limitations in your state, be very careful about acknowledging or paying on those debts. If you make a payment, the clock resets – the statute of limitations starts over from your new payment date. Same if you make a written promise to pay. Don’t restart the clock accidentally!

You have a few options if you have old debts nearing the statute of limitations:

  • Pay off the full balance – this avoids interest and legal issues.
  • Ask for a settlement – offer to pay a % of the balance as full payment.
  • Wait it out – stop payment until the statute of limitations passes.
  • Claim bankruptcy – debts discharged in bankruptcy are not subject to statutes of limitation.

Consider your specific situation carefully and understand the pros and cons of each approach.

The statute of limitations doesn’t eliminate debts

At the end of the day, remember that the statute of limitations doesn’t magically eliminate what you owe. It just limits the creditor’s options to collect through the legal system. Debts fall off your credit report after 7 years, but still technically exist even once the statute of limitations passes. Don’t view it as a “get out of debt free” pass – work in good faith with creditors on old debts when possible.

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