What to Know About the Statute of Limitations On Debt

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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 limitations that 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 may decide 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 include delinquent 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 limitations for debt, on the other hand, is the period of time that debt is legally enforceable. Meaning, the amount of time a 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.

The last date of activity on an account may be different from the date your account 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 consumers when 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 the Complete 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.

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.

Article Sources

  1. Federal Trade Commission Consumer Information. "Time-Barred Debts." Accessed Feb. 29, 2020.

  2. Federal Trade Commission. "Fair Credit Reporting Act § 605. Requirements Relating to Information Contained in Consumer Reports," Pages 22-23. Accessed Feb. 29, 2020.

  3. Consumer Financial Protection Bureau. "What is the Statute of Limitations on a Debt?" Accessed Feb. 29, 2020.

  4. Federal Trade Commission. "Under FTC Settlement, Debt Buyer Agrees to Pay $2.5 Million for Alleged Consumer Deception." Accessed Feb. 29, 2020.