If you have old, unpaid debts, you might be safe from lawsuits to collect them. Creditors and debt collectors have a limited number of years to sue you for outstanding debts. This time limit is called the "statute of limitations."
The time allowed varies significantly from state to state, and for different kinds of debts. Written contracts, oral contracts, promissory notes, and open-ended accounts (like credit cards) can all have different statutes of limitations.
However, under specific circumstances, the statute of limitations can restart. 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 it.
The time limit for a particular statute of limitations starts to run from the time the agreement is breached. Usually, that means:
The amount of time a creditor has to sue you depends on the type of debt you have and your state's laws.
Many states categorize the following as "written contracts" for the purpose of the statute of limitations:
Whatever your state's law sets as a statute of limitations for written contracts will usually apply to a written credit agreement with your creditor.
If you made a promise to pay but didn't put it in writing, or if a creditor claims that you owe money based on a verbal agreement, then most states will apply a different statute of limitations.
The statutes of limitations for oral agreements are either shorter than the time limit for written contracts (most states) or the same time limit (other states).
Some states distinguish credit cards from standard "written contracts" and instead classify them as open-ended or revolving accounts. In those cases, the statute of limitations might be different. They're usually shorter than the time limits for written contracts.
However, some states give creditors (especially credit card companies) the option of treating the credit account as a written contract, thus extending the statute of limitations even further.
A different statute of limitations might apply if you enter into an installment payment agreement directly with a retailer. A retail installment agreement is different from a credit card in that the creditor is the store that sold you the goods, as opposed to a third-party bank financing your purchase.
You pay the purchase price directly to the seller over time. Usually, the statute of limitations, if applicable, is much shorter than the time limit for written contracts.
The time period within which a mortgage lender can foreclose on your home might be different than the period for other written contracts.
State law sets the statutes of limitations. They usually range from about three to ten years depending on the type of debt.
To find out the statute of limitations for debts in your state, you can:
If a creditor waits too long to sue you, you generally must raise this as a defense in the papers you file in response to the lawsuit. If you can prove that the statute of limitations period has passed, the creditor can't get a judgment against you.
But an expired statute of limitations doesn't usually eliminate the debt; it merely limits the judicial remedies available to the creditor or collection agency after a specific time. A debt collector may still seek voluntary payment of an old debt even though they can't use a lawsuit to force you to pay it.
Aggressive debt collectors sometimes try to enforce debts even when the statute of limitations has passed. They buy these debts from original creditors for pennies on the dollar, so they make a tidy profit if they collect anything.
Just because the statute of limitations has expired doesn't mean a creditor or collector won't sue you. They might file a collection lawsuit after the limitations period has passed, hoping you won't notice that the statute of limitations has expired and won't raise it as a defense to the suit.
You'll have to raise the statute of limitations as a defense if you get sued. If you don't, the creditor may be able to get a judgment against you on an otherwise unenforceable debt.
Some debt buyers use aggressive tactics when trying to collect 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. (For more information on this topic, see page 2 of this article).
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