Have you ever had a debt get tossed from one collector to another over what seems like ages? At some point, the cycle has to stop, right?
Debts have sort of an expiration date known as the statute of limitationsthat keeps debt collectors, and even the original creditor, from pursuing it indefinitely. Before you agree to pay an old debt, first make sure the statute of limitations hasn’t expired. If the time limit has expired, you maydecide it's in your best interest not to pay.
Two Time Limits For Debts
Many people get the statute of limitations confused with the credit reporting time limit. While they’re both time limits related to debt, they have different effects, and they're triggered by different events in the debt's life cycle.
The credit reporting time limit is the maximum amount of time credit bureaus can includedelinquent debts on your credit report. For most types of accounts, it's seven years from the date of delinquency. However, bankruptcies are reported for ten years. The credit reporting time limit is dictated by the Fair Credit Reporting Act and does not influence the statute of limitations for collecting a debt.
The statute of limitationsfor debt, on the other hand, is the period of time that debt is legally enforceable. Meaning, the amount of timea creditor or collector can use the court to force you to pay for a debt. The time period starts on the account’s last date of the activity and varies by state.
Note
The last date of activity on an account may be different from the date your account was past due if you made any payment or payment arrangement after that time.
How to Use It to Your Advantage
Some debt collectors will continue to attempt to collect on an account even after the statute of limitations has expired. Consumers who aren't aware of the statute of limitations or who are intimidated by the collection agency may pay up to avoid worse action, like a lawsuit. If you're certain the statute of limitations has expired, that's your defense against paying an old debt.
Be careful not to restart the statute of limitations by taking any action on the account. Making a payment, making a promise of payment, entering a payment agreement, or making a charge with the account can restart the statute of limitations. When the clock restarts, it restarts at zero, no matter how much time had elapsed before the activity.
Crackdown on Collectors
After being sued by the FTC in 2012,Asset Acceptance, one of the largest debt buyers,agreed to notify consumerswhen their debts were past the statute of limitations by including in the debt collection notice "Given the age of the debt we will not sue you." It may also include, "and we will not report it to any reporting agency."
Not all collection agencies will include this disclosure, so the burden of proof remains on you.
How Does It Apply to My Debt?
The statute of limitations is usually between three and six years but is as high as 15 years in one state. Check out theComplete List of Statute of Limitations by State to learn the debt statute of limitations for your state.
Some debts don't have a statute of limitations. It includes federal student loans, child support in some states, and income taxes. You cannot use the statute of limitations as a defense in a lawsuit regarding any of these even if you haven't taken any action on the account in several years.
Note
If you recently moved, sneaky debt collectors might try to use your home state for the statute of limitations, especially if that time limit is longer than of the state you currently reside in. It would give a collector more time to collect on the debt.
What the Statute Of Limitations Does Not Do
Keep in mind when the statute of limitations expires, it only prevents a collector from winning a judgment against you when you can prove the statute of limitations has expired. It does not:
- Keep a collector from filing a lawsuit against you. It can keep them from winning if you use it against them in court.
- Erase the debt. If the debt is legitimately yours, you still owe it until it is canceled by the creditor or discharged in bankruptcy.
- Prevent the debt from being reported on your credit report. The debt can be reported as long as the credit reporting time limit allows.
FAQs
The statute of limitations on debt in California is four years, as stated in the state's Code of Civil Procedure § 337, with the clock starting to tick as soon as you miss a payment.
Can a debt from 20 years ago be collected? ›
Old (Time-Barred) Debts
In California, there is generally a four-year limit for filing a lawsuit to collect a debt based on a written agreement.
Can a 10 year old debt still be collected? ›
Can a Debt Collector Collect After 10 Years? In most cases, the statute of limitations for a debt will have passed after 10 years. This means a debt collector may still attempt to pursue it (and you technically do still owe it), but they can't typically take legal action against you.
What happens if a debt is more than 10 years old? ›
If you've already been given a court order for a debt
There's no time limit for the creditor to enforce the order. If the court order was made more than 6 years ago, the creditor has to get court permission before they can use bailiffs.
What is the 11 word phrase to stop debt collectors? ›
If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
Can a debt collector restart the clock on my old debt? ›
Keep in mind that making a partial payment or acknowledging you owe an old debt, even after the statute of limitations expired, may restart the time period. It may also be affected by terms in the contract with the creditor or if you moved to a state where the laws differ.
Can you dispute a debt if it was sold to a collection agency? ›
Can you dispute a debt if it was sold to a collection agency? Your rights are the same as if you were dealing with the original creditor. If you do not believe you should pay the debt, for example, if a debt is stature barred or prescribed, then you can dispute the debt.
What happens if you never pay collections? ›
In some cases, the creditor or collection agency might decide to take legal action against you. If the court rules in their favor, you could face wage garnishment, a lien on your assets, or seizure of property, depending on state laws.
Does disputing a debt restart the clock? ›
Does disputing a debt restart the clock? Disputing the debt doesn't restart the clock unless you admit that the debt is yours. You can get a validation letter to dispute the debt to prove that the debt is either not yours or is time-barred.
Should I pay off a 10 year old collection? ›
Clearing old debts can halt the persistent calls, letters, and emails from debt collectors, offering you peace of mind and safeguarding you from baseless threats. While the statute of limitations does prevent debt collectors from suing you over debts, you are still responsible for repaying your credit card bills.
The law does not eliminate the debt, it merely limits the time frame that a creditor or collection agency has to take legal action to collect it. The time frame varies from state-to-state but is generally 3-6 years.
Will debt collectors give up? ›
If the debt is not collected, then the debt collector does not make money. In many cases, although you would think that debt collectors would eventually give up, they are known to be relentless. Debt collectors will push you until they get paid, and use sneaky tactics as well.
Can you get debt written off? ›
Creditors can agree to a reduced payment over a limited period, with the rest of the balance written off in some circ*mstances. This is often done using legal procedures but might be agreed by an individual creditor on your request.
How to get out of collections without paying? ›
You cannot remove collections from your credit report without paying if the information is accurate, but a collection account will fall off your credit report after 7 years whether you pay the balance or not.
Can I ignore Lowell letters? ›
If you are still struggling to meet the payments, it is important not to ignore any notices or letters sent by Lowell Financial Ltd regarding overdue payments, as this could lead to further action being taken against you, such as legal proceedings.
What happens after 7 years of not paying debt? ›
The debt will likely fall off of your credit report after seven years. In some states, the statute of limitations could last longer, so make a note of the start date as soon as you can.
What makes a debt uncollectible? ›
Key Takeaways
Accounts uncollectible are receivables, loans, or other debt that will not be paid by a debtor. Reasons for accounts uncollectible relate to bankruptcy or a refusal to pay by the debtor. Goods sold on credit usually have a 30 to 90 day time period in which to be made whole.
Do you still owe debt after 7 years? ›
Does credit card debt go away after 7 years? Most negative items on your credit report, including unpaid debts, charge-offs, or late payments, will fall off your credit report seven years after the date of the first missed payment. However, it's important to remember that you'll still owe the creditor.
