What is the statute of limitations for debts?

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

In this context, all consumer debt, from credit card balances to medical bills, has limits on the number of years creditors can legally sue you for payment.

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

Rules can vary greatly from state to state. In 22 states, for example, the statute of limitations for private student loans is six years. However, 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.

Be careful 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 on state debt collection with the time limit for credit reports. While both are debt-related terms, they have different effects and are triggered by different events in the debt life cycle.

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

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 that 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, an account's last activity date 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 debt statute of limitations 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 that 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 if a debt has passed its statute involves looking at what type of debt it is and what statutes are applicable," says Colin Hector, a lawyer for the Federal Trade Commission. “You need some legal acumen, so you might want to check with legal aid, an attorney, or a state attorney's office."

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

• Office of the State Attorney General: Can provide free legal information but can be difficult to obtain.

• Local legal help: It's cheap, but your lawyers and paralegals are often overworked.

• A lawyer: Can offer faster and personalized help but at a higher cost.

How does the debt statute of limitations 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 verbal contracts and four years for written contracts. Therefore, if you live in California and it has been four years and one day since the last activity on a written contract, the debt collector will not be able to sue you.

In most states, the limitation period ranging from three to 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 begins 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 of them. Debt categories include:

• Oral agreements: Debts that were made in verbal agreements to return 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 a debt in specific payments at a specified interest rate on a specified date.

• Open Accounts: Accounts with variable revolving balances that can be borrowed over and over as long as the balance continues to be paid. A credit card and a line of credit are examples of open accounts.

How do you use the statute of limitations for your law?

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 who are intimidated by the collection agency can 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 off an old debt.

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

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 for a complete list of prescriptions by the state to know how this matter is handled in yours.

Now, some debts do not have a statute of limitations, and this includes federal student loans, child support in some states, and income taxes. In other words, you cannot use the statute of limitations as a defense in a lawsuit over any of these debts, even if you have not 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 acquired the debt in the first place.