7 Things You Need to Know About the Statutes of Limitation for Debt

statutes of limitation for debt

You may not know this, but, yes, debt does technically have an expiration date. It’s subject to a statutes of limitations, which limits how long a creditor or collector has to sue to recoup an unpaid balance. Statutes of limitations (SOL) vary by state and debt type. They’re usually between 3 to 6 years, but some longer windows do apply. Of course, you shouldn’t treat the SOL as a solution to your money woes. For starters, those expiration dates have nothing to do with how long a unpaid debt can appear on your credit report (that’s generally around 7 years — more here) and it’s possible for a court to award a judgment to a creditor on time-barred debt if you don’t show up to raise the issue. Plus, there are ways to unwittingly restart the SOL clock. Having said all that, if you have old unpaid debts, it can be helpful to know the statutes of limitation that applies to them. (You can check your credit for outstanding accounts by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your free credit report summary on Credit.com.)

Here are the seven most common questions we’ve received from readers about the statutes of limitation for debt.

1. How Long Is the Statute of Limitation for my Debt?

The time period typically either starts when you fall behind on a debt, or from the date of your last payment, and the length of time depends on state law for that type of debt. This chart is a guide to state statutes of limitation. Unfortunately, it is not always clear-cut. So it’s a good idea to check with your state attorney general’s office, a consumer law attorney or legal aid, especially if you are being threatened with legal action.  

2. Can a Debt Collector Try to Collect After the SOL Has Expired? 

In many cases, yes. However if you tell the debt collector not to contact you again, they must stop. It’s a good idea to put your request in writing. Once they’ve received it, they can contact you only to confirm that they have received your request or to notify you of legal action they are taking to collect. In some states, however, trying to collect a time-barred debt is illegal and a creditor who attempts to do so is breaking the law. 

3. If the SOL Has Expired Can I Still Be Sued? 

It is not uncommon at all for consumers to be sued for time-barred debts. If you are sued for an old debt and the statute of limitation has expired, you can raise the expired statute of limitation as a defense against the lawsuit (here are some other debt collection defenses you can use, too). However, many consumers do not appear in court and therefore the creditor or collector gets a judgment against them. That is why you should not ignore a legal notice about a debt, even if you think the debt is too old. A consumer law attorney or bankruptcy attorney can help you figure out how to respond. 

4. Should I Pay an Old Debt? 

That’s something only you can decide. However, keep in mind that if you pay anything — even a small amount — on an old debt, you may restart the statute of limitation. That’s why it can be risky to pay an old debt if you can’t afford to pay it in full. You could open yourself up to collection efforts, or even a lawsuit, for the entire amount the collector says you owe. 

5. Can a Debt Still Appear on my Credit Reports After the SOL Has Expired? 

In many cases, the answer is yes. The length of time that negative information may be reported is governed by the federal Fair Credit Reporting Act. Most negative information can be reported for seven years. The statutes of limitation for most consumer debts, on the other hand, is four to six years. So you could have a situation, for example, where the statute of limitation expired on a debt in four years but the related collection account still appears on your credit reports for another three years after that. And, yes, collection accounts can do serious damage to your credit scores.

6. I Took Out a Debt in One State but Moved. Which State’s SOL Applies? 

That can be a difficult question to answer. Consumers can generally be sued in the state where they took out the loan or the state where they currently live. Sometimes the statute of limitation will be based on the laws of the state described in the contract (in the case of credit cards, that will be spelled out in the credit card agreement). 

When it’s not clear which state’s SOL applies, it is often up to the court to decide. In a number of court cases, the statute of limitation that was shortest was applied. But that’s not true in all cases. That’s why it is helpful, if you are being sued for a debt, to consult with a consumer law attorney who can help you understand whether the statute of limitation has likely expired.

7. What Is the SOL for Court Judgments? 

If a creditor or collector has obtained a court judgment there is often a separate statute of limitation that applies to judgments. (Tip: If you have unresolved debts, be sure to at least get your free annual credit reports, as we mentioned, to see if any judgments are listed.) In many states, that time period is 10 years or longer, and judgments may be renewed. Learn more about how about judgments work here.

Dealing with debt? if you’ve got questions about how to best manage those burgeoning balances, ask away in the comments section below and one of our experts will try to get back to you. In the mean time, feel free to check out of Managing Debt Learning Center

This article has been updated. It originally ran on April 20, 2015.

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Can an Old, Unpaid Bill Keep Me From Getting an Apartment?

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Searching for a good place to live is tricky enough to make anyone, even a person without past financial problems, hate the process. So to find an apartment that’s affordable, has the features that meet your needs and is in a decent location, only to have the landlord hold up your application because of an old item on your credit report — well, it’s frustrating, to say the least. A Credit.com reader recently found themselves in this situation:

I have a PG&E bill from 2010 that is on my credit report, but PG&E show it as a discharge and are not asking for payment. I need to clear this up before my new landlord will allow me to move into a new place. If I secure a settlement for this can I request them to remove this from my credit report?

We put the question to John C. Heath, a credit expert and consumer attorney for Lexington Law, a Credit.com partner. Here’s what he said.

“I don’t know if I would attempt to secure a settlement. The amount has been written off,” Heath wrote in an email to Credit.com. The reader may want to check the statute of limitations in their state, because the debt may no longer be enforceable, Heath added.

This may take some explaining to your landlord. “I would speak with the landlord and see if they would be willing to overlook a [six-year-old] debt. A lot can change in a six year period,” Heath wrote.

Negative information on credit reports (like a charged-off debt) generally remains there for seven years. It’s important to remember that this goes for paid, unpaid and settled debts alike — so paying off an old debt doesn’t remove the negative history from the record. However, if you feel information on your credit report is inaccurate or unfair, you can challenge it with the credit bureaus and data furnishers reporting it to them. You can do this on your own (you can go here to learn more about disputing errors on your credit report), or you could consider hiring a reputable credit repair professional to help you. To keep tabs on your credit and any negative items affecting it, you can get two free credit scores with regular updates from Credit.com.

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U.S. Marshals Arrest Man Over Decades-Old Student Loan Debt of $1,500

old student loan debt

The student loan debt problem in the U.S. has gone to a whole new level of scary. Last week, armed U.S. Marshals showed up at a Houston man’s home, arrested him and escorted him to federal court, where he signed a repayment plan for a decades-old overdue student loan, reports FOX 26 in Houston.

The Marshals reportedly showed up to Paul Aker’s home (with guns) to collect a past-due $1,500 federal student loan he borrowed in 1987. The report did not say how much Aker owes after fees and interest. The U.S. Marshal Service in Houston did not immediately respond to a request for comment from Credit.com, but FOX 26 cites an unnamed source saying Aker was not the first and won’t be the last to have been arrested over unpaid federal student loans. The service reportedly has to serve from 1,200 to 1,500 arrest warrants for people who haven’t paid their federal student loans.

Failing to pay a federal student loan is already a miserable experience, before you add in the threat of armed government officials knocking on your door. In addition to having a loan balance that grows with late fees, debt collection fees and interest, people who default on federal student loans face wage garnishment, seizure of tax refunds and reduction in other government benefits. Then there are the credit consequences: Defaulting on a loan seriously damages your credit score, and because student loans are rarely discharged in bankruptcy, the debt can beat down on you for decades. (You can see how your student loans are impacting your credit scores for free on Credit.com.)

There are some options for people who are behind on federal student loan payments to get back on track. To get out of default, you can combine eligible loans with a federal Direct Consolidation Loan, or you can go through the government’s default rehabilitation program. If you make nine consecutive on-time payments (and the payments can be extremely low), your account goes back into good standing, and the default is removed from your credit report.

Or you could just wait for the U.S. Marshals to show up and make you enter a repayment plan. Up to you.

More on Student Loans:

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Debt Collectors Went After a Student Loan Debt… 50 Years Later

Young people aren’t the only ones plagued with student loan debt problems. Recently, an Arizona man found a debt collection notice in his mailbox, which said he owed more than $1,900 on student loans he took out in the 1960s, reports 3TV in Phoenix.

About 50 years ago, after serving in the Navy, Ralph Caswell borrowed three loans totaling about $2,500. Caswell told 3TV he repaid the student loans decades ago, and while the collection agency shows his principal balance as zero, it claims Caswell owes about $1,400 in interest, $87 for a penalty and $362 in fees. Caswell said the agency asked him to provide proof he paid off the loans, but he doesn’t have those records. That’s not too surprising, considering how long ago he said he paid off the debt.

This situation suggests you should keep that type of documentation forever: alongside your birth certificate, Social Security card and passport, there’s your student loan statement. While that may sound a little overboard, it’s important to note that student loan debt is treated differently than other debts in many respects. These loans can generally not be written off in bankruptcy, and the consequences of failing to repay student loan debt can follow you for years. If you don’t repay federal student loans, the government can take some of your wages, seize your tax refunds or garnish Social Security payments.

There are lots of rules governing debt collectors’ actions and the timeframe of debt collection, and it’s important that consumers generally understand their rights when trying to resolve new (and old) issues.

Caswell will now have to work out whether he owes the debt with the collector — and, possibly, a consumer attorney. He found out about the claim when he got a notice in the mail, but it will probably show up on his credit report, if it hasn’t already. (Caswell told 3TV he currently has good credit.) Regularly reviewing your credit reports can help you spot surprises like this and potentially resolve them more quickly. You can get your credit reports for free each year on AnnualCreditReport.com and view your credit scores for free each month on Credit.com. If you think items on your reports are incorrect, here’s a guide to credit reporting errors and how they happen.

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