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Statute of limitations on car debt: How long is too long?

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A line of cars positioned diagonally to the left
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If you have an unpaid car loan that is multiple years old, you may be wondering if you still have to pay it. There is a statute of limitations for every state on debt collection, so if you made the last payment on your debt before a certain time, the lender or debt collector may not be able to sue you in order to make you pay.

However, if your vehicle has been repossessed or you gave it up voluntarily, you may still be responsible for a deficiency payment. A deficiency payment is a payment you owe if the debt owed is greater than the value of your car. If you don’t pay this amount, your debt can be sold to collectors.

Can a lender collect on a deficiency after repossession?

When your car gets repossessed, or you give it up voluntarily, the lender may ask you to pay a deficiency balance. This is a balance they can charge you to cover the difference between the debt you owe and the value of the car.

The lender has a right to collect this deficiency balance and if you don’t pay it, it may take further action. It can sell your debt to a collection agency, and you may have a lawsuit filed against you resulting in a wage garnishment or a lien on your other property.

If you can’t pay the deficiency balance on your car debt, your best bet is to talk to the lender as soon as possible. They may work with you to negotiate your debt or set up a payment plan.

Statutes of limitations vary by state

There is a statute of limitations on all debts, including car loans. This statute varies based on the type of debt and from state to state. The clock on the statute of limitations starts ticking at the date of the last payment. Once the statute of limitations on a debt is reached, the debt becomes time-barred, and the collection agency can no longer sue you for payment.

According to the Consumer Financial Protection Bureau (CFPB), “A debt collector must not bring or threaten to bring a legal action against a consumer to collect a time-barred debt.”

Even if the statute has passed, the collection agency is still allowed to contact you, though they can’t sue you for nonpayment. You can send them a certified letter demanding that they stop contacting you. However, you still technically owe the debt. Nonpayment can still affect your credit score if the debt is still within the statute of limitations.

Each state has different statutes of limitations. According to the CFPB, these typically range from three to six years, but some states have statutes of limitations that last longer. You can find your state’s specific statute of limitations through its courts office.

Other reasons a lender might not be able to collect

While a lender has the right to collect a deficiency payment on a car loan that is within the statute of limitations, there are a few cases when they aren’t allowed to collect a deficiency balance.

You may not need to pay if:

  • There are defects in the loan papers that don’t allow for a deficiency payment to be collected.
  • The creditor didn’t provide the legally required written notices to try to collect your debt.
  • The creditor didn’t sell your car in an honest and fair way.
  • The creditor didn’t sell the car at all.
  • You filed for bankruptcy.

If you think you might not need to pay the deficiency balance, you may want to consult a lawyer for legal advice.

The bottom line

Every car loan has a statute of limitations on how long you are responsible for the debt. When considering your debt payment, make sure you know all the facts. Find advice on your car loan and legal resources through the Consumer Financial Protection Bureau. And always consult legal help if needed.


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Written by
Emma Woodward
Contributing writer
Emma Woodward is a former contributor for Bankrate and a freelance writer who loves writing to demystify personal finance topics. She has written for companies and publications like Finch, Toast, JBD Clothiers and The Financial Diet.
Edited by
Auto loans editor