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What is the statute of limitations on debt?

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If debt collectors keep contacting you about a debt that fell into collections years ago, you owe it to yourself to do some research. There’s a chance they can’t sue you to collect the debt.

Debt collectors have a limited time to file a lawsuit against you. As soon as this time frame, or statute of limitations, is over, they no longer have the right to sue you to recoup the debt.

What is the statute of limitations on debt?

The statute of limitations on debt is the length of time that debt collectors have to sue you to collect old debts. Once the statute of limitations expires, collectors can’t win a court order for repayment.

This means they won’t be able to garnish your wages or place a lien against your home. What they can do, however, is continue to contact you and ask you to repay. Depending on the state in which you live, they may still have the right to call you or send you letters.

How to tell if a debt is time-barred

A time-barred debt is a debt that has passed the statute of limitations in your state. It’s important to understand that you still owe a time-barred debt, and your credit score may take a dip if you don’t repay it. The main advantage of a time-barred debt is that you can’t be sued or taken to court for it.

The type of debt you have, as well as the statute of limitations in your state, will determine how old a debt has to be before it’s considered time-barred. Consult a consumer protection attorney or the consumer protection agency in your state to find out if a debt you owe is time-barred.

How does the statute of limitations on debt work?

Each state has its own statute of limitations for each type of debt. In California, for example, the statute of limitations is two years for oral contracts and four years for written contracts. So, if you live in California and it’s been four years and one day since your last activity on a written contract, the debt collector won’t be able to sue you.

In most states, the statute of limitations ranges from three to six years. There are some states, however, that allow debt collectors up to 10 years to file a lawsuit against you. The statute of limitations time clock usually starts the date of your first missed payment.

Categories of debt

There are four major categories of debt. There is often a different statute of limitations for each category. The categories of debt include:

  • Oral agreements: Debts that were made on verbal agreements to repay the money. There are no written contracts on these debts.
  • Written contracts: Any written agreement that was signed by you and a creditor and features the terms and conditions of a loan.
  • Promissory notes: Written agreements to repay a debt in specified payments at a specified interest rate by a specified date.
  • Open-ended accounts: Accounts with varying revolving balances that you can borrow from over and over as long as you keep repaying the balance. A credit card and line of credit are examples of open-ended accounts.

Can you get sued after the statute of limitations expires?

After the statute of limitations expires, debt collectors lose the legal right to sue or threaten to sue you for a time-barred debt. However, this doesn’t mean a debt collector won’t sue you.

If the debt collector believes the statute of limitations has not yet passed because their records show a more recent date, they may still sue. In addition, a debt collector may sue thinking you won’t be able to prove that the statute of limitations has passed or won’t attend the court proceeding to protect yourself.

In the event the debt collector sues you after the statute of limitations expires, consult an attorney. They can guide you through the process of asking the judge to dismiss your case and ensure your rights are protected.

Should you pay your debts after the statute of limitations expires?

After the statute of limitations expires, it’s in your best interest to repay the debt you owe. If you can’t afford to, try to negotiate with the collector to see if you can pay them less than you owe. By taking care of your debt, even after the statute of limitations has passed, you can improve your credit and increase your chances of securing affordable financing in the future.

The bottom line

The statute of limitations protects you from being sued by debt collectors after a certain time period is up. However, this does not mean you no longer owe the debt. Even after the statute of limitations has passed, collectors may contact you and seek payment.

To stop them from contacting you, come up with a plan for repaying your debt. Once you tackle your debt, you’ll enjoy less stress and better financing options in the future.

Written by
Anna Baluch
Contributing writer
Anna Baluch is a former Bankrate contributing writer. She is a personal finance freelance writer from Cleveland who enjoys writing about debt, mortgages, student loans, personal loans and auto financing.