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Is There A Statute of Limitation on Debt Collection?

Imagine one day your looking at your credit report casually.

You notice you have a collection on your account from a bill you once had years ago.

Now, you know you didn't stick to the agreement and fell behind on the bill.

But why are you just now seeing it in collections? Can they do that?

Know your rights when it comes to debt collections, there are statutes of limitations that can protect you.

The real question is: Is there a statute of limitations on debt collection?

What is a statute of limitations on debt?

A statute of limitation on debt is just a limit on the amount of time creditors can take legal action to collect a debt.

This offers you a level of protection if you're sued for a loan you took out years ago.

Your defense could be that the loan is too old.

When does the timer start?

In some states, the time on the statute of limitations begins when you miss a required payment.

In other states, the clock starts based on your most recent payment, even if that payment was during collection. Partial payments count as well.

It's also important to note that any acknowledgment of the debt to the creditors or debt collectors restarts the clock.

What is a time-barred debt?

Once a debt is past the statute of limitation, it is considered time-barred.

This means that the creditor or debt collector can no longer legally pursue it.

How does it work for debt collection?

So now that we know, most states have a statute of limitation on debt.

What is the best thing to do if your debt is time-barred?

First, you must understand that the debt is still owed to the debt collector.

However, if a creditor takes legal action after the statute of limitations, this could allow you ammunition to file a dispute.

So you have about 3 options moving forward:

  • Negotiate and Settle- because the debt is still owed, if you're planning to make any large purchases anytime soon, you may want to negotiate a lower payment and settle the debt.

  • Pay the debt in full- you could pay the debt in full, especially if it's not a large amount. This can sometimes be easier than negotiating the debt.

  • Don't Pay- lastly, you could not pay the debt at all and let it charge off your account after 7 years. Keep in mind that this charge-off can affect your credit score.

Types of Debt that can have a statute of limitation?

Written Contracts

Written contracts serve the essential function of documenting a legally binding agreement between two parties, regardless of their form.

Both parties sign a physical document that outlines the loan's terms and conditions.

Oral contracts

Oral contracts are spoken agreements that are more challenging to enforce legally since they are not documented in writing and are typically made between acquaintances.

Beware of these types of contracts even amongst close friends and family.

Promissory notes

Promissory notes are similar to written contracts. They are less detailed than written contracts and only require the borrower's signature.

Open-ended contracts

Open-ended contracts are accounts that provide a credit line, allowing borrowers to borrow and repay debt constantly as long as they make payments.

What is the statute of limitations for your state?


Statute of limitation by states A-L