Time-Barred Debts: When Collectors Cannot Sue You for Unpaid Debts

The statute of limitations bars creditors from suing for unpaid debts after a certain period of time.

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If you have old, unpaid debts, you may be safe from a lawsuit to collect the debt. This is because a creditor or debt collector has a limited number of years to sue you for an unpaid debt. This time period is set by state law and is called the statute of limitations.

The time allowed varies greatly from state to state and for different kinds of debts. Under certain circumstances, this time period can be restarted. So be very careful when talking to debt collectors about old debts. If you say the wrong thing, you could extend the time the creditor has to sue you for the debt.

When Are Debts Time-Barred?

To determine if your debt is time-barred -- that is, too old for a creditor or collector to sue you for it -- you must do some legwork.

Determine what kind of debt it is. Is the debt based on a written contract, oral contract, or a promissory note (a written promise to pay money to somebody)? Is it a credit account? If so, is it open-end or closed-end credit?

Is the Account Open- or Closed-End Credit?

Determining whether an account is open-end or closed-end is not always easy. Generally, if you can use the account repeatedly, it's open-end credit (also called "revolving credit"). Your payments vary depending on how much credit you have used in a certain period of time. The most common example of open-end credit is a credit card.

Closed-end credit usually involves a single transaction, such as the purchase of a house or car, and the payments are fixed in amount and number.

Many transactions fall somewhere in between open- and closed-end credit. Also, many creditors try to characterize a closed-end account as open-end, either to take advantage of a longer statute of limitations or to avoid providing the more extensive disclosures required for closed-end credit.

The statute of limitations for open- and closed-end accounts is often different. To complicate matters even more, the statute of limitations for an open-end account is not always clear. Some states have a special statute of limitations for credit card accounts. Others apply the statute of limitations for written or oral contracts to open-end credit.

Determine when the debt was due. This is when the statute of limitations starts ticking. For open-end accounts, the statute of limitations starts to run when the first payment was due.

Find the applicable statute of limitations. Statutes of limitations are set by state law. They usually range from about three to ten years and depend on the type of debt. To find out the statute of limitations for debts in your state, you can:

  • Check out Nolo's 50-state chart: Statute of Limitations in All 50 States.
  • Consult a lawyer.
  • Check out your state laws, either by going to a local law library, contacting your state consumer protection agency (see Nolo's article State Consumer Protection Offices to find your local consumer protection agency), or doing some research on the Internet. To find your state's laws and get information about legal research, see Nolo's Legal Research area.

Using the Statute of Limitations

If the creditor has waited too long to sue you, you must raise this as a defense in the papers you file in response to the lawsuit. If you can prove that the debt is older than the statute of limitations, then you will not have to pay it. If the creditor or debt collector knows that the statute of limitations has expired on the debt and still sues you, it may have violated the federal Fair Debt Collection Practices Act (FDCPA)

However, a statute of limitations does not eliminate the debt -- it merely limits the judicial remedies available to the creditor or collection agency after a certain period of time. A debt collector may still seek voluntary payment of an old debt even though the law cannot force you to pay it.

Some Debt Collectors Try to Enforce Time-Barred Debts

In recent years, aggressive debt collectors have begun trying to enforce debts that are barred by the statute of limitations. They buy these debts from original creditors for pennies on the dollar, so they make a tidy profit when they collect anything.

Some of these debt buyers use aggressive tactics when they try to collect on time-barred debts. According to media reports, they abuse and harass debtors and try to trick debtors into reaffirming debts so that the statute of limitations begins anew.

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