Statute of Limitations

Statute of Limitations for Debts

The statute of limitations sets forth the maximum period of time that legal proceedings can be initiated under certain types of contracts and events. You should know the statute of limitations for debts in your state, because if the time period has passed, a creditor cannot legally enforce payment of the debt.

If creditors are calling to harass you, in an attempt to collect on old credit card debts, as well as others, it may be within your legal right to stop them immediately, without fear of legal reprisal, as long as the time period set forth by the statute of limitations has passed. All you need do is point out that the debt has expired, and that will be the end of the story. If they would be foolish enough to file a lawsuit, and rarely do creditors do this anyway when they don’t believe they can collect on a debt–you would have a valid defense. Basically they are stuck with an expired debt.

In the case of credit card debt, these are known as open-ended contracts or revolving accounts. The statute of limitations starts from the day the debt or account last had activity on it. So, beginning at the time you last made a payment on your account, the clock starts ticking. Creditors know this, and this is why they have a time-table for how they handle past due amounts. There are many details that can reset the clock or change the time-frame. Moving to another state, waiving your right by signing a contract on a payment plan with a creditor, or other activities could remove your right to the expiration of debt under the statute of limitations.

There is no statute of limitations on certain types of debts, such as federal student loans, fines, child support, and usually taxes.  The ability to collect on taxes technically has a statute of limitations, but it can be extended by filing of forms. Judgments also have an expiration date, but they can also be extended.

Note that the statute of limitations is different from the length of time that a negative item can show up on your credit report.

The time it takes for a debt to expire under the statute of limitations varies from state to state and depends on what state you were living in when the debt was signed in, and/or where you currently live. You should always consult with an attorney for legal advice and inquire about the statute of limitations in your state, as well as other legalities, before taking any action.