The Statute of Limitations On Debt Can Help Debtors Avoid Paying Creditors

January 16, 2010

Many people in debt can attest to the fact that they get countless calls and letters from collectors looking for money. Your debt can get tossed around from one collector to another. So when does the cycle ever stop?

Debts have a statute of limitations that keeps debt collectors, and even the original creditor, from pursuing it indefinitely. It is sort of like an expiration date on your debt. Before you agree to pay an old debt, first make sure the statute of limitations hasn’t expired. If it has, you might not have to pay.

Two Time Limits For Debts

Many people get the statute of limitations confused with the credit reporting time limit. While they are both time limits related to debt, they have different effects.

The credit reporting time limit is the maximum amount of time credit bureaus can report delinquent debts on your credit report. For most types of accounts it is seven years from the date of delinquency. However, bankruptcies are reported for 10 years and tax liens can be reported for up to 15 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 collecting a debt is the period of time that 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 activity and varies by say.

Using The Statute To Your Advantage

The statute of limitations starts on the last date of activity on the account. The last date of activity can be different from the date the account was past due. Your credit report will include the account’s last date of activity so be sure to get your credit report before you pay a debt.

Even if the statute of limitations has expired, some debt collectors will continue to attempt to collect. They are hoping you don’t know about the statute of limitations and you will pay up if they threaten you enough. They might even file a lawsuit against you. If you are certain the statute of limitations has expired, you can use that fact as justification that you do not have to pay the debt.

Be careful not to restart the statute of limitations. Anytime you take an action with an account, the statute of limitations is restarted. Making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account can restart the statute of limitations on an account. When the clock restarts, it restarts at zero, no matter how much time had elapsed before the activity.

Know Your Statute Of Limitations

The statute of limitations is usually between three and six years, but can be as high as 15 years in some says. Be sure to find out what your says’s statute of limitations is before you concur to pay debt.

If you recently moved, 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. This would give a collector more time to collect on the debt.

Some debts do not have a statute of limitations. This includes federal student loans, child support in some says and income taxes.

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 indeed 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.
Prevent the debt from being reported on your credit report. The debt can be reported as long as the credit reporting time limit allows.

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