The Statute of Limitations on Debt

The statute of limitations. You’ve most likely heard the term before, but you may not know exactly what it means or how it affects you in a situation where you owe a debt. Well, here’s a quick rundown of what it means and how it impacts you during a debt collection.

The statute of limitations refers to the amount of time that a debt collector or creditor can obtain a court judgment to force you to pay a debt. Once the time has expired, a debt collector cannot win a lawsuit against you if you can prove the statute of limitations for your debt has passed. The statute of limitations varies from state to state and according to the type of debt you have, but it can be anywhere from two to 15 years. Generally, if you move to a different state, the state where you currently reside is where the statute of limitations will apply. According to the Federal Trade Commission, debts that have passed the statute of limitations are called time-barred debts. These debts are so old that they are past the point that a debt collector can sue you. And under the Fair Debt Collection Practices Act, a debt collector is not allowed to sue you or threaten to sue you for a debt that is time-barred.

Be aware that debts like student loans and taxes have no legal limitations on collection. Also know that the statute of limitations does not erase your debt, it just means that you cannot be forced by a court to pay it. Credit information website, Credit Infocenter, has a state-by-state list of the statute of limitations. You should also check with the attorney general’s office for  your state to double-check if your debt meets the statute of limitations.

A side note: If a collector calls you about a time-barred debt and you acknowledge that you owe the debt, you could unintentionally re-start the statute of limitations. In this case, you can be sued. In part II, we’ll explain what you should do if a debt collector contacts you after the statute of limitations on your debt has passed.

Part 2.

Sheiresa Ngo is the multimedia content producer for consumer affairs at Black Enterprise.

Be sure to also read…