What is the statute of limitations for debt?

The debt statute of limitations is a law that limits the time a creditor can sue you to pay a debt.

In this vein, all consumer debt, from credit card balances to medical bills, have limits on the number of years that creditors have the legal right to sue you for payment.

As usual, the law of the state where you live determines the prescription of specific debts, even if you acquired that debt elsewhere. In some states, the statute of limitations on credit card debt credit it is three years, while in others it is up to 10.

Keep reading: What is the statute of limitations in the United States?

The rules can vary greatly from state to state. In 22 states, for example, the statute of limitations on private student loans is six years. But nevertheless, Some creditors add clauses to their agreements detailing that the laws of a specific state will govern the contract regardless of where the customer lives.

Beware if debt collectors harass you, because making even a single payment on an overdue debt account can reset the clock and revive the creditor’s ability to sue you.

Statutes of Limitations vs Credit Reports

Many people confuse the statute of limitations with the credit reporting time limit. While both are debt-related terms, they have different effects, and are triggered by different events in the life cycle of the debt..

The credit reporting time limit is the maximum amount of time the credit bureaus can list delinquent debt on a credit report. For most types of accounts, it is seven years from the date of the delinquency. However, bankruptcies are reported for ten years. The credit reporting time limit is dictated by the Federal Fair Credit Reporting Act (FCRA) and does not influence the statute of limitations for debt collection.

On the other hand, the prescription of the debt is the period of time in which that debt is legally enforceable. That is, the amount of time a creditor or collector can use the court to force you to pay it. The time period begins on the last date of account activity and varies by state.

In this regard, the last activity date of an account may be different from its expiration date if any payment or payment arrangement is made after that specific time.

How to know if a debt has prescribed

After the statute of limitations on the debt passes, the debt is considered “prescribed” and cannot be legally sued, but collectors can still try. Your obligation to pay, however, is kept on record. This means future creditors will see it, which can make it harder for you to get new lines of credit, and the ones you do get will likely have higher interest rates.

“Determining whether a debt is past its statute involves looking at what type of debt it is and what statutes apply,” says Colin Hector, a lawyer for the Federal Trade Commission. “You need some legal acumen, so you might want to check with legal help, a lawyer, or your state attorney general’s office.”

These options can help you find the statute of limitations for the debts you face. However, the best option for you depends on your time and budget.

  • Office of the State Attorney General: You can provide free legal information but it can be difficult to obtain.
  • Local Legal Help: It’s cheap, but its lawyers and paralegals are often overworked.
  • A lawyer: You can offer personalized and faster help but at a higher cost.

How does the statute of limitations for debts work?

Each state has its own statute of limitations for each type of debt. In California, for example, the statute of limitations is two years for oral contracts and four years for written contracts. Therefore, if you live in California and four years and one day have passed since the last activity on a written contract, the debt collector will not be able to sue you.

In most states, the statute of limitations is between three and six years. However, some states allow debt collectors up to 10 years to file a lawsuit. In this sense, the statute of limitations clock generally starts on the date of the first late payment.

Debt Categories

There are four main categories of debt, and there is often a different statute of limitations for each. Debt categories include:

  • Oral agreements: Debts that were made in verbal agreements to repay the money. There are no written contracts on these debts.
  • Written contracts: Any written agreement that was signed by you and a creditor that includes the terms and conditions of a loan.
  • Promissory notes: Written agreements to pay off a debt in specified payments at a specified interest rate on a specified date.
  • Open accounts: Accounts with variable revolving balances that can be borrowed from again and again as long as the balance continues to be paid. A credit card and a line of credit are examples of open accounts.

Get information from the collector

Debt collectors are legally required to give you information about the debt they’re trying to collect, so asking them for more information can help you determine if the debt is time-barred.

Now, be careful when you talk to collectors. Do not promise to make a payment or give them any payment information, such as a bank account, because they may take this as acceptance of the debt.

If you recognize the debt as yours

Gather all the information you have about her, such as the amount, any payments you’ve made, and the date of your last payment. This serves as your arsenal against debt collectors. And ask the collector two simple questions:

  • Has the debt prescribed?
  • When was the date of the last payment?

If debt collectors accept the first question, they are required by the Fair Debt Collection Practices Act (FDCPA) to answer it truthfully. However, they are not required to respond at all. If the collector doesn’t respond, ask about the date of the last payment. The statute of limitations clock starts when an account becomes delinquent, typically 30 days after a payment is missed.

If a collector does not disclose this information, refer to the debt validation letter. A collector must send you this letter within five days of first contact; If you haven’t received it within 10 days, please order it. This notice must include the amount due, the date of the last payment, details about the collector, and how to request information about the original creditor.

If you do not recognize the debt

The debt collection industry is notorious for trying to collect from the wrong people. As debts are sold by the original creditor to a third party and possibly sold again, a debt collector will likely have less and less truthful information about it. As a result, you may be contacted to pay a debt that is not yours at all. In consecuense, We recommend that you consult your own records and the validation letter to clarify any discrepancies. This will help you determine how to act.

How to use the statute of limitations in your favor

Some debt collectors will keep trying to collect a debt even after the statute of limitations has expired.. Consumers who are unaware of the prescription or intimidated by the collection agency may pay to avoid a worse action, such as a lawsuit. If you’re sure the statute of limitations has expired, that’s your defense against paying an old debt.

Now, be careful not to reset the statute of limitations by avoiding any action or action on the account in question. Making a payment, making a promise to pay, signing a payment agreement, or debiting the account may reset the statute of limitations. When the clock resets, it returns to zero, no matter how much time has elapsed before the activity.

The fight against collectors

After being sued by the Federal Trade Commission in 2012, Asset Acceptance, one of the largest buyers of debt, agreed to notify consumers when their debts became time-barred, including in the collection notice a message that reads “Given the age of the debt, we will not sue him.” However, not all collection agencies will do the same, so the burden of proof remains on you..

How does this apply to my debt?

The statute of limitations is usually between three and six years, but in one state it can be as long as 15 years. Therefore, we recommend that you look up a complete list of prescriptions by state to learn how this issue is handled in your state.

Now, some debts do not have a statute of limitations, and this includes federal student loans, child support in some states, and income taxes. That is, you can’t use the statute of limitations as a defense in a lawsuit over any of these debts, even if you haven’t taken any action on the account in several years.

Warning: If you’ve recently moved, debt collectors may try to use your state of residence for the statute of limitations, especially if that time limit is longer than the state in which you first acquired the debt.

What the statute of limitations does not do

Keep in mind the statute of limitations only prevents a collector from winning a lawsuit against you, as long as you can prove that the statute of limitations has expired. However, the statute does not:

  • Prohibits a debt collector from filing a lawsuit against you. But as we have mentioned, you can win the lawsuit if you prove that the statute has expired.
  • Erase the debt. If the debt is rightfully yours, you are still responsible for it until the creditor writes it off or discharges it in bankruptcy.
  • Prevent the debt from being reported on your credit report. Debt continues to be reported as long as the credit reporting time limit allows.

Keep reading: How to get out of debt: Step by step guide

Can I be sued after the statute of limitations has expired?

Once he statute of limitations expires, debt collectors lose the legal right to sue or threaten to sue you. However, this does not mean that a debt collector will not do it.

If the collector thinks the statute of limitations has not happened because their records show a more recent date, they can still sue. In addition, a debt collector may also do so if they believe that you will not be able to prove that the statute of limitations has expired, or that you will not attend the trial.

In the event that the collector sues you after the statute of limitations expires, consult an attorney. They can guide you through the process of asking the judge to dismiss the case and make sure your rights are protected.

Should I pay my debts after the statute of limitations has expired?

After the statute of limitations expires, it is in your best interest to pay the debt you owe. If you can’t, try negotiating with the debt collector to see if you can pay them less than you owe. By taking care of your debt, even after it has prescribed, you can improve your credit and increase your chances of obtaining affordable financing in the future.

In conclusion

The statute of limitations protects you from being sued by debt collectors after a certain period of time. However, this does not mean that you are no longer responsible for that debt. Even after the statute has expired, collectors can contact you and demand that you pay. To prevent this from happening, Make a plan to pay off your debt. Once you do this, you will have less stress and enjoy better financing options in the future.

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