Do you have debt that keeps you up at night?
It might help you to learn more about the statute of limitations on debt collection, which effectively gives a debt collector a deadline for suing you over debt. This legal cutoff will vary, depending on your state and your situation.
What Is a Statute of Limitations on Debt?
The statute of limitations on debt collection is the amount of time a bill collector has to file a lawsuit against someone over debt. It protects debtors from being liable for their debts forever.
The statute of limitations on debt collection isn’t the same for all types of debt and across all states. In fact, it’s determined by three factors:
- Type of debt
- The state you live in
- The state specified in contract (if different from the state you live in)
After a statute of limitations passes, debt becomes time-barred. This means a debt collector no longer has the right to sue the debtholder for the debt.
Debt doesn’t disappear after the statute of limitations passes. Debt collectors can still try to collect the debt, but they can’t legally sue over it.
The court doesn’t keep track of when the statute of limitations passes and your debts become time-barred. If summoned to court over a time-barred debt, you need to show up with documentation—like checks, payment history and records of communication—to prove the statute of limitations has passed.
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Types of Debt
Many states have different statutes of limitations depending on the type of debt. Debts are split into four different categories: written contracts, oral contracts, promissory notes and open-ended contracts.
Written Contracts
A written contract is a physical document signed by both the borrower and the creditor. It outlines the agreement, including the terms and conditions of the loan, and is legally binding. Examples include car loans and medical debt.
Oral Contracts
Oral contracts are spoken agreements, usually between two people who know each other. Because these contracts aren’t in writing, they’re harder to legally enforce.
Promissory Notes
Similar to a written contract, a promissory note is a written promise of payment. It includes the amount to be paid, who will pay it, interest terms and a time frame for payment. It contains less detail than a written contract and only requires the borrower’s signature. A common example of a promissory note is a private student loan.
Open-Ended Contracts
Open-ended contracts are accounts that provide a credit line. This means even if you owe money, the account remains open—if you’re making payments. You can constantly borrow and repay debt with an open-ended account. Credit cards are a common example of open-ended contracts.
Should You Pay Debts That Are Past the Statute of Limitations?
Even though you’re protected from being sued after the statute of limitations has passed on your debt, you technically still owe it. Plus, the statute of limitations has no effect on your credit—an unpaid debt will remain on your credit report for seven years, regardless.
You have three options when it comes to paying your time-barred debt:
- Don’t pay. If you don’t pay, collectors can still call you. After all, you still owe the debt. Plus, the outstanding debt can still negatively affect your credit for up to seven years from the date of the original delinquency.
- Pay the full amount. Paying your debt could improve your credit score and put a stop to persistent debt collectors. This might be difficult if you don’t have money for the payment.
- Settle the debt. You may be able to negotiate a smaller payment with a collector. Just be sure you get a signed agreement that confirms you’re settling the debt, and keep a record of your payments. Debt settlement can still negatively impact your credit, but less so than nonpayment.
- Make a partial payment. Paying a fraction of the debt can reset the clock on the statute of limitations. That’s why making a partial payment (or even promising to) isn’t typically a good idea.
Before making a decision, it’s a good idea to consult a lawyer.
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Statute of Limitations by State
Each state has its own statute of limitations on debt. Some states have the same statute of limitations on all four types of debt, while others have a different statute of limitations for each.
Remember that some creditors operate under the statute of limitations in their state, not yours. Keep this in mind when looking into the statute of limitations on your debts.
The table below shows the different statutes of limitations for each type of debt in every state.
Bottom Line
A statute of limitations on debt collection is the amount of time a collector has to take legal action against someone over debt. The statute of limitations varies from state to state and also depends on the type of debt. Regardless of whether the statute of limitations has passed, you still owe your unpaid debt—and it will show up on your credit report for seven years.
Frequently Asked Questions (FAQs)
When does the clock start on the statute of limitations on debt?
Generally, the clock starts on the statute of limitations on debt after the last account activity. In some states, the clock starts when you first miss a payment on your debt. The statute of limitations on debt can also reset in some cases. For example, in some states, if you make another payment or even acknowledge a debt in writing, the clock can reset.
Are the statute of limitations on debt collection and your credit report related?
No. Unpaid debts disappear from your credit report after seven years, regardless of the state you live in. If you live in a state where the statute of limitations is longer than seven years, a debt collector can still sue you over the debt until the statute of limitations has passed—even after the debt disappears from your credit report.
What is the IRS statute of limitations on collection?
The statute of limitations on debt collection by state is different from the IRS statute of limitations on collection. The latter is the amount of time the government can pursue collection on tax liabilities. The IRS statute of limitations on collection is 10 years.
Is there a statute of limitations for collections on student loans?
Private student loans fall into the category of promissory notes, and the statute of limitations depends on your state. There is no statute of limitations for federal student loans, however. This means there’s no limit on how long a collector can sue for unpaid federal student loans.
