Collectors of debt are well-known for the way they conduct business. They’re more concerned about getting paid than the method they use to collect the debt.
As long as they are able to pay the debt they don’t care about consumers’ rights, or even if they’re actually harassing the correct person. It is the responsibility of the consumer to be aware of state laws that govern debt collection.
Statute of Limitations and its Impact on Debt Collection Efforts
The time period established by statutes of limitations to collect debt is an important aspect in determining the credibility of agencies that collect debts to collect on debts owed by consumers. The reason for statutes of limitations is provide consumers protection from debts that are not paid that are extremely old.
Only in extreme circumstances can consumers be pursued even after decades have passed since the initial debt was incurred. In certain cases, such as credit card debt or other debts that are not secured the statute of limitations is seven years from the date of activity.
Be cautious when Dealing with Debt Collectors
As an individual consumer, you need be vigilant even if you’re the one in debt, as debt collectors can attempt to deceive you. When you are dealing with your own financial affairs nobody else has your best interests in mind.
You must be aware of the Fair Debt Collection Practices Act (FDCPA) which is an act of the federal government which governs the collection of debt. Additionally, you must be aware of the laws of your state regarding debt collection and regulations. Debt collectors are known for their shady strategies when trying to convince people to pay back past-due debt.
If a debt collection agency violates the provisions of the FDCPA You have a variety of options to take action. You can complain to the office of your local attorney general or the Federal Trade Commission (FTC) or with the Consumer Financial Protection Bureau (CFPB).
In many cases, people pay off their debts since they remain on their credit reports. The fact that the debt is listed on your credit report does not necessarily mean that you must pay it.
The only occasion to pay an old debt that is past the time limit is if you you can convince an individual to eliminate the negative item off your credit report. The statute of limitation on debt is a separate matter from the limits on reporting on debts in your credit report.
Statute of Limitations on Debt Collection May Vary By Contract Type
The term of non-paid debts is based on the kind of debt it is. In general there are four types of debt you must be aware of. Each one is different in terms of the length of time you’re required to repay them.
1. Oral Contracts
The first kind of debt agreement is an oral one that is built on a verbal agreement to repay the debt. You’re bound by an oral agreement even when you don’t have a certified copy of the document that proves you owe the money. However oral agreements are more difficult to enforce in courts.
2. Written Contracts
Written contracts are a different kind of agreement that could result in an obligation to repay. The type of contract used is legally binding and stipulates the amount that was taken out in writing. Medical debt is a prime instance of a loan which could be covered by an agreement in writing.
The creditor and the debtor have an agreement in writing that has been executed by both parties. Written contracts are legally binding when enforceable in court. They are simpler to enforce because all provisions and conditions of the agreement are written writing.
3. Promissory Notes
A promissory note can be very like the contract. It provides a brief description of the terms and conditions for the payment. It is considered to be a “negotiable instrument”. Notes of promissory are drafted with the “Promise to Pay” statement that includes an outline of the way in which the note will be repaid.
A promissory note can be described as a written commitment to pay an obligation. A mortgage is an excellent example of promissory note. It describes the specifics of the debt, which include the lender and borrower and repayment schedule and the repayment terms.
4. Revolving Line of Credit
A Revolving line of credit is a credit line that is opened to the user to utilize at their own discretion. The amount of money borrowed and the terms of repayment may change according to the creditworthiness of the borrower, market conditions and the person’s past in dealing with a creditor.
Two examples of a revolving line credit are home equity lines of (HELOCs). A revolving credit line can be either an unsecure or secured loan.
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 instance, 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.
If a credit card is signed on an application, the period of limitations on the credit is likely to be more than a contract that is oral.
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.
Since January 1st , 2019, the debt collectors in California are required to inform that you time-barred debts. In the first written communication addressed to you, they need to include the notice after the statute of limitations passes if it’s a time-barred debt.
Which jurisdiction is your credit card debt subject to?
While you should consult a lawyer or a paralegal regarding specific issues the jurisdiction that decides the time limit for a statute of limitations.
In the majority of instances, it will fall under the jurisdiction in which you signed the credit card application or credit card contract. However, in certain cases it could be the state in which you reside currently. Every state as well as the District of Colombia has its own laws.
Debt collectors might attempt to shift the site of the matter to one where they will have the time they need to pursue recovery of the debt they believe you have to pay. However, this does not mean that they will be able to do it. It is your responsibility to make an argument with conviction as to the reasons why the limitations statute in another state is appropriate.
Is your debt past the statute of limitations?
A quick method to determine if the debt being repaid is in violation of the limitation period:
Step One
Find out the date of your the last transaction. This is the date when you last made a payment to the account, or the date you received an email asking for payment of any debt arising from your delinquency.
Step Two
Check out the table in the previous paragraph and locate the state for which you reside. Take the current year and subtract it from the year of the previous action on the credit card. Then take the result and compare it to the time period that your state permits a creditor to take over the debt.
If the total number of years remaining on the statute of limitations are lower than the present year, minus the year of the activity that was last completed then you are in good standing.
Example
Let’s take a look at an example. Jim bought a few things using his credit card in the year 2017 but did not make payments after in the year. The bank sold the old debt to an agency for collection from a third party that is currently trying to collect the debt in 2022.
So you take 2017 which is the year of the last transaction on the account and subtract it from 2022 to you will have five years. Now, you take a look at the state in which you made the transaction or the state where you are currently living or are currently living, whichever is more important, and then look at the time period in relation to five years.
If the number is higher than five, they are granted legal rights to pursue the debt that is not paid. However when the limitation period is shorter than five years old, you aren’t legally required to settle the debt.
You’re “safe” from being sued over the debt as you have what’s known as an unassailable defense. However, you won’t automatically be able to win a debt collection lawsuit in the event that you fail to provide this defense. You must still appear in court and present the defense to stop any judgement against you.
Should You make a partial payment?
Even when the time for extending the statute of limitations is over it is possible to make an installment payment to the debt, since you technically borrowed the money. While this is a noble idea, it is important to be aware of the implications that you’re making. In certain states, even a partial payment to the debt resets the period.
Resetting the Clock
In the above example the date of the last event was in 2016, however, now that you’ve made an installment in 2021, it begins the clock again.
When you make a payment, you acknowledge that this is your debt. This means that they are able to get the debt. It also means that they can bring you to court and pursue you for the amount you haven’t paid.
Nearing the Expiration Date?
What should you do if you are nearing the date of expiration? You might have an unpaid collection debt which is nearing expiration and you don’t even know the date.
Collectors of debt are well aware of the time limit. In the event that they don’t receive their money on time, they will are legally in no position to collect the debt they paid to obtain.
Increased Pressure
In reality the debt collectors could add pressure since they are aware that in the next month or two, they’ll be unable to collect the debt.
As as a consumer, it’s your responsibility as well as your right to be informed of the limitations period within your area of jurisdiction. In addition, you must be aware of what it means that a debt is out of the collection actions.
If you’re in the middle of a debt that is due to expire and you’re being approached by an untrustworthy debt collector You can send an official cease and desist letter asking them to stop calling you. Legally, you don’t need to pay any debt that is past the time limit of.
Can a debt collector attempt to collect on time-barred debt?
The answer is contingent upon the state where you reside. In certain areas, the debt collector is still able to collect any debts owed.
You can choose to request in writing that they stop calling you, which can give you some relief from being harassed by telephone calls constantly.
It is best to put the request in writing so that that there is an official record of the request. After that, the debt collector might only call you once more to inform you they have received your request. At that point they will also inform you if they are planning to take legal action.
In other states, it’s not legal for debt collectors to try to collect on debts that are time-barred. Check out the laws of your state to determine the type of state you’re in.
Can you be accused of a crime after a debt has expired?
Yes, you could be sued however, you may apply the expiring time limit as a part of the defense.
Debt collectors are most likely to have success when you don’t show to court for the proceedings. In fact, it’s the time you’re most likely receive a judgement. If you’re given any type of legal notice about your debt, address it immediately. If you’re unsure of what to do, call an experienced lawyer for assistance.
Does the debt remain on your credit report even after it has expired?
Yes, as the requirements for credit report reporting as set out in the Fair Credit Reporting Act (FCRA) differ from state law regarding statutes of limitations.
The credit bureaus that report collections typically are listed on your credit report for seven years following the date you first fell over the balance on your account. After this time has passed the account won’t affect your credit score.
For instance, if you reside in a state that has the statute of limitations for debt collection have a maximum of five years a delinquent loan will show up on your credit report for two years. It is this unless you get it removed.
Which state’s statute of limitations applies to your debt if you’ve moved to a different state?
Legal complexities become more complicated when there are multiple states involved. If you have a credit card that was in collection in one state and you moved to a different state check your agreement with the creditor who originally made the move.
In some cases, particularly when it comes to credit cards the conditions of your contract defined the laws of the state that will be followed. In the majority of cases, this is the state where you resided at the time that the contract was first signed.
If the contract does not specify which state’s rules are applicable and the court can decide if a debt collector can pursues you. The court usually rules against the most short time limit however, this isn’t always the case. Your best option in this case is to seek out an attorney to assist.
Is there a statute of limitations for court judgments?
Yes, court judgements in the majority of states are 10 years old, and it can be longer in some states. Additionally, statutes of limitation on court judgments may be renewed.
Know Your Rights and Avoid Unnecessary Payments
In summary these are the main aspects to be able to learn from this piece:
Even if you’ve signed a legal agreement that promises to pay back a debt, you’re not legally bound to pay it. This is the case regardless of whether the non-payment or default on the loan is noted in your credit report.
Repaying a time-barred debt could increase your risk of lawsuits. Creditors are not able to take away wages, freeze bank accounts or file a lawsuit to pay a debt after it is beyond the time limit. Therefore, it is essential to verify the limitations period prior to making any payments or admitting that you owe the debt even if it’s still on your credit report.
