Debt collectors are well known for the way they do business. They’re much more concerned with getting paid than with how they go about collecting the debt.
As long as they can collect the debt, they care little about consumers’ rights or even whether they are hounding the right person. It’s up to consumers themselves to be informed of state laws that deal with debt collection.
Statute of Limitations and Its Impact on Debt Collection Efforts
The time frame set by the statute of limitations for debt collection is a major factor in determining the legitimacy of collection agencies’ efforts to recover debts from consumers. The purpose behind statutes of limitations is to give consumers protection from unpaid debts that are very old.
Only in the most extreme cases can consumers be collected upon, even decades after the original debt was incurred. In some cases, like credit card debt and other unsecured debt, the statute of limitations is up to seven years after the date of the last activity.
Be Careful When Dealing with Debt Collectors
As a consumer, you need to be cautious even if you are responsible for a debt, as some debt collectors may try to deceive you. When it comes to your own personal finances, no one else is going to have your best interest at heart.
You should be aware of the Fair Debt Collection Practices Act (FDCPA), which is a federal law that regulates debt collection. In addition, you should know your state’s debt collection laws and rules. Debt collectors are notorious for their unscrupulous tactics when it comes to attempting to get consumers to pay up on past-due debt.
If a debt collector violates the terms of the FDCPA, you have several options for taking action. You can file a complaint with your local attorney general’s office, the Federal Trade Commission (FTC), or the Consumer Financial Protection Bureau (CFPB).
In many cases, consumers pay off these debts because they continue to appear on their credit reports. Just because the debt appears on your credit report doesn’t necessarily mean you have to pay it.
The only time you should pay an old debt beyond the statute of limitations is if you know you can get a debt collector to remove the negative item from your credit report. The statute of limitations on debt is an entirely separate issue from the reporting limits on debt on your credit report.
Statute of Limitations on Debt Collection May Vary By Contract Type
The time limit on unpaid debt is determined by the type of debt it is. Generally speaking, there are four types of debt that you should know about. Each is treated differently in terms of how long you’re still obligated to pay them.
1. Oral Contracts
The first type of debt contract is an oral contract, which is based on a verbal agreement to pay back the money. You’re obligated to pay on an oral agreement, even if you don’t have a signed piece of paper showing you owe the money. However, oral agreements are a lot harder to enforce in court.
2. Written Contracts
A written contract is another type of agreement that can create a debt obligation. This type of contract is a legally binding document that specifies the amount of money that has been borrowed in writing. Medical debt is one example of a debt that may be covered by a written contract.
The debtor and the creditor have a written agreement that is signed by both parties. Written contracts are binding in court and are easier to enforce because all the terms and conditions of the agreement are in writing.
3. Promissory Notes
A promissory note is very similar to a contract. It briefly states the terms and agreements of the payment. It is considered a “negotiable instrument”. Promissory notes are written with a “Promise to Pay” statement which includes an outline of how the note will be paid.
A promissory note is a written promise to pay a debt. A mortgage is a good example of a promissory note. It outlines the details of the debt, including the borrower and lender, the repayment schedule, and the terms of repayment.
4. Revolving Line of Credit
A revolving line of credit is a credit line opened for the consumer to use at their discretion. The amount borrowed and the terms of repayment can fluctuate based on creditworthiness, market conditions, and a person’s history with the creditor.
Two common examples of a revolving line of credit are credit cards and home equity lines of credit (HELOCs). A revolving line of credit can either be an unsecured or secured debt.
Note: The ability of the original creditor or a third-party collection agency to legally collect on a debt often depends on the terms of the contract that the borrower signed.
For example, if you do not physically sign a contract when you apply for credit, the agreement may not meet the formal definition of a written contract.
As for a signed credit application, the statute of limitations on that debt would probably be longer than on an oral contract.
Statute of Limitations on Debt Collection By State
| State | Open-ended Accounts (credit cards) | Oral | Written | Promissory |
|---|---|---|---|---|
| Alabama | 3 | 6 | 6 | 6 |
| Arkansas | 3 | 3 | 5 | 5 |
| Alaska | 3 | 6 | 6 | 3 |
| Arizona | 3 | 3 | 6 | 6 |
| California | 4 | 2 | 4 | 4 |
| Colorado | 3 | 6 | 6 | 6 |
| Connecticut | 3 | 3 | 6 | 6 |
| Delaware | 4 | 3 | 3 | 3 |
| Dist. of Columbia | 3 | 3 | 3 | 3 |
| Florida | 4 | 4 | 5 | 5 |
| Georgia | 6 * | 4 | 6 | 6 |
| Hawaii | 6 | 6 | 6 | 6 |
| Iowa | 5 | 5 | 10 | 5 |
| Idaho | 4 | 4 | 5 | 5 |
| Illinois | 5 | 5 | 10 | 10 |
| Indiana | 6 | 6 | 10 | 10 |
| Kansas | 3 | 3 | 6 | 5 |
| Kentucky | 5 | 5 | 15 | 15 |
| Louisiana | 3 | 10 | 10 | 10 |
| Maine | 6 | 6 | 6 | 6 |
| Maryland | 3 | 3 | 3 | 6 |
| Massachusetts | 6 | 6 | 6 | 6 |
| Michigan | 6 | 6 | 6 | 6 |
| Minnesota | 6 | 6 | 6 | 6 |
| Mississippi | 3 | 3 | 3 | 3 |
| Missouri | 5 | 5 | 10 | 10 |
| Montana | 8 | 5 | 8 | 8 |
| North Carolina | 3 | 3 | 3 | 5 |
| North Dakota | 6 | 6 | 6 | 6 |
| Nebraska | 4 | 4 | 5 | 5 |
| New Hampshire | 3 | 3 | 3 | 6 |
| New Jersey | 6 | 6 | 6 | 6 |
| New Mexico | 4 | 4 | 6 | 6 |
| Nevada | 4 | 4 | 6 | 3 |
| New York | 6 | 6 | 6 | 6 |
| Ohio | 6 | 6 | 15 | 15 |
| Oklahoma | 3 | 3 | 5 | 5 |
| Oregon | 6 | 6 | 6 | 6 |
| Pennsylvania | 4 | 4 | 4 | 4 |
| Rhode Island | 4 | 10 | 5 | 6 |
| South Carolina | 3 | 3 | 3 | 3 |
| South Dakota | 6 | 6 | 6 | 6 |
| Tennessee | 6 | 6 | 6 | 6 |
| Texas | 4 | 4 | 4 | 4 |
| Utah | 4 | 4 | 6 | 6 |
| Virginia | 3 | 3 | 5 | 6 |
| Vermont | 3 | 6 | 6 | 5 |
| Washington | 3 | 3 | 6 | 6 |
| Wisconsin | 6 | 6 | 6 | 10 |
| West Virginia | 5 | 5 | 10 | 6 |
| Wyoming | 8 | 8 | 10 | 10 |
Note: The actual statute of limitations in Georgia is officially 4 years. However, the Georgia Court of appeals came out with a ruling on January 24, 2008, that indicates that it’s 6 years on credit card debts.
As of January 1, 2019, debt collectors in California have to tell you about time-barred debts. In the first written communication sent to you, they have to include the notice after the statute of limitations passes if it’s a time-barred debt.
Which jurisdiction is my credit card debt subject to?
While you should speak with a paralegal or lawyer about specific questions, the jurisdiction determines the statute of limitations.
In most cases, it will fall under the jurisdiction where you signed the credit application or credit card agreement. However, in some cases, it could be in the state where you live now. Each of the 50 states and the District of Colombia has its own laws.
Debt collectors may try to change the location of the case to a place where they have more time to pursue the collection of the debt they claim you owe. However, that doesn’t mean they will be allowed to do so. It’s your responsibility to present a strong argument for why the statute of limitations from a different state should be applied.
Is my debt past the statute of limitations?
A simple way to figure out whether the debt that’s being collected is past the statute of limitations:
Step One
Find out the date of last activity. This would be the date you last paid on the account or when you first got a letter in the mail demanding payment for any debt because of your delinquency.
Step Two
Look at the table above and find it for your state. Subtract the current year from the year of the last activity on the credit account. Then, compare the result to the time period your state allows a creditor to collect a debt.
If the number of years on the statute of limitations is smaller than the current year minus the year of last activity, you should be in the clear.
Example
Let’s work through an example. Jim ordered some things on his credit card in 2019 and stopped making payments later that year. The bank sold this old debt to a third-party collection agency that is now attempting to collect in 2024.
So, you take 2019, which is the date of last activity on the account, and subtract it from 2024 and get five years. Now you look at the state where you made the transaction or where you currently live, whichever one is greater, then you compare that time period to five years.
If the number is greater than five, they have a legal right to pursue the unpaid debt. However, if the debt statute of limitations is less than five years, you don’t legally have to pay the debt.
You are “safe” from being sued over the debt because you have what is known as an absolute defense. However, you will not automatically win a debt collection lawsuit if you do not present this defense. You still have to go to court and raise the defense to prevent a judgment against you.
Should I make a partial payment?
Even if the statute of limitations has expired, you may consider making a partial payment on the debt, as you did technically borrow the money. While that is a very noble sentiment, you should realize the implications of what you’re doing. In some states, making even a partial payment on the debt resets the time period.
Resetting the Clock
In our example above, the day of last activity was in 2019, but now that you’ve made a payment in 2024 that starts the clock all over again.
By making a payment, you are admitting that indeed it is your debt. This means they can attempt to collect the debt. It also means they can take you to court and sue you for the money you have not paid.
Close to the Expiration Date?
What do you do if you are close to the expiration date? You may have an unpaid debt in collections that is close to expiring, and you don’t know it.
Debt collectors are very aware of the statute of limitations. The fact is, if they don’t get their money in time, they have no legal recourse to collect on the debt they have paid to acquire.
Increased Pressure
In fact, debt collectors may increase the pressure because they know that in a month or two they’ll have no recourse to collect on a debt.
As a consumer, it is both your responsibility and your right to be informed about the statute of limitations in your jurisdiction. Additionally, you need to know what it means for a debt to fall outside the range of collection action.
If you have an unpaid debt that has expired, and you’re being contacted by a questionable debt collector, you can send a certified cease and desist letter requesting that they stop contacting you. Legally, you do not have to repay a debt that is beyond the statute of limitations.
Can a debt collector attempt to collect on time-barred debt?
The answer really depends on the state in which you live. In some places, the debt collector can still attempt to collect any amounts owed.
You do have the option to formally request that they stop contacting you, which at least gives you some relief from being badgered by phone calls all the time.
It’s best to do this in writing, so there is a record of the request. Thereafter, the debt collector may only contact you one more time to let you know they received your request. At that time, they can also tell you if they plan to take any legal action.
However, in other states, it’s actually illegal for a debt collector to attempt to collect on time-barred debt. Look up your state laws to know which type of state you live in.
Can you be sued after a debt has expired?
Yes, you can still be sued, but you can use the expired statute of limitations as part of your defense.
Debt collectors have the most success when you don’t show up for the court proceedings. In fact, that’s when you’re most likely to receive a judgment. If you receive any kind of legal notice regarding your debt, respond to it right away. If you’re not sure what to do, contact an experienced attorney for help.
Does debt stay on your credit report after it has expired?
Yes, because credit reporting requirements as outlined in the Fair Credit Reporting Act (FCRA) differ from state law on statute of limitations.
Collection accounts that are reported to credit bureaus generally remain on your credit report for seven years from the time you first fell behind on the account. After this period has passed, they will no longer impact your credit score.
For example, if you live in a state where debt collection statutes of limitations are five years, a delinquent debt will appear on your credit report for another two years. This is unless you can have it removed.
Which state’s statute of limitations applies to your debt if you’ve moved to a different state?
Legal intricacies get complicated when there’s more than one state involved. If you have an account that went into collections in one state, then you moved to another, first check your contract with the original creditor.
Sometimes, especially with credit cards, the terms of your contract have already established which state’s laws will be used. In most cases, this is the state in which you lived when the contract started.
If the contract doesn’t define which state’s rules apply, then the court may decide if the debt collector sues you. Oftentimes the court will rule in favor of the shortest statute of limitations, but that hasn’t always been the case. Your best bet in this situation is to get an attorney to help.
Is there a statute of limitations for court judgments?
Yes, court judgments in most states are 10 years, and it can be even more in some. Plus, statutes of limitations on court judgments can usually be renewed.
Know Your Rights and Avoid Unnecessary Payments
In summary, here are the key points to take away from this article:
Even if you have signed a legal document promising to repay a debt, you are not necessarily legally obligated to repay it. This is true even if the nonpayment or delinquency of the debt has been reported on your credit report.
Repaying time-barred debt can make you more vulnerable to lawsuits. Creditors cannot garnish wages, freeze bank accounts, or file a successful lawsuit for payment of a debt once it is beyond the statute of limitations. Therefore, it is important to confirm the statute of limitations before agreeing to make any payment or admitting to owing the debt, even if it is still listed on your credit history.
