All states have statutes of limitation that define exactly how long creditors have to file a lawsuit against you for an unpaid debt. The laws vary based on the state and the type of debt. Third-party debt collectors must adhere to the same laws as original creditors. However, certain things you do may extend the statute of limitations, giving debt collectors more time to sue.
State Statutes of Limitation
State statutes of limitation for debt collection are organized by the type of debt. Oral contracts, written contracts, promissory notes and open-ended accounts are the four main categories of debt.
- Oral contacts may include handshake deals or oral agreements regarding a loan or a service.
- Written contacts are signed agreements, whether written on paper or communicated electronically. Some examples of written contracts include cell phone and utility service agreements, car loans and personal loans.
- Promissory notes are legal instruments in which one party promises to pay a sum of money under specific terms. Promissory notes are commonly associated with mortgages and student loans.
- Open-ended accounts have a varying balance. Credit cards are the most common open-ended accounts.
The statutes of limitation for each category are typically three to six years, but they can be as much as 15 years in some states.
When a creditor is unable to collect a debt, it turns the debt over to internal collections staff or a third-party debt collector. If the creditor charges off the debt, it often sells it to a third-party collector.
The statute of limitations isn't affected by the sale of your debt. The clock starts ticking on the date of last activity, which is typically the last payment.
Resetting the Clock
Although the statute of limitations doesn't extend just because a debt is sold to a collection agency, certain actions may reset the clock. If you acknowledge the debt, make a payment on it or even agree to pay the debt, the debt collector can restart the clock based on the new date of last activity.
After the Statute of Limitations
After the statute of limitations is up in your state, the debt collector can no longer sue or threaten to take you to court over the debt. If it does, the collector is in violation of the Fair Debt Collection Practices Act, which prohibits unfair and abusive practices. Debt collectors can still call and send letters asking you to repay the debt, but they don't have any way to force you to pay. You have the right to ask debt collectors to stop contacting you and they must comply.
The debt can remain on your credit report for seven years, regardless of where you live. It doesn't matter if your state's statute of limitations has expired or not. There's nothing you can do or say that will extend the statute of limitations for credit reporting. For accounts that are charged off or sent to collections, the seven-year period begins 180 days after the first missed payment that led to the delinquency.
- U.S. Federal Trade Commission. "Time-Barred Debts." Accessed Feb. 6, 2020.
- U.S. Federal Trade Commission. "Fair Debt Collection Practices Act." Accessed Feb. 6, 2020.
- Credit.org. "Complete Guide to the Statute of Limitations on Debt." Accessed Feb. 6, 2020.
- FICO. "Errors on Your Credit Report." Accessed Feb. 6, 2020.
Jeannine Mancini, a Florida native, has been writing business and personal finance articles since 2003. Her articles have been published in the Florida Today and Orlando Sentinel. She earned a Bachelor of Science in Interdisciplinary Studies from the University of Central Florida.