Understanding a very delicate statute of limitations.
A statute of limitations is a common feature of the United States legal system that limits the amount of time someone can be held accountable for a certain action. Debt collection is no different. Your creditors and the subsequent collectors and debt buyers only have a certain amount of time that they can file suits to collect on a debt.
However, the statute of limitations on debt can be pretty delicate. You can do things to reset it and in some states, collectors can even continue to seek payment as long as they don’t go through the courts. As a result, a bad debt can end up following you even after the statute of limitations expires.
The information below can help you understand how long collectors can pursue you and what they (and you) can do that may extend that time. If you have questions or need help handling debt to get a collector off your back, call us or complete the form to the right to get started.
The statute of limitations on collection
Every state has different rules for the number of years a debt collector can pursue payment through the courts. The maximum is 15 years, but the specific number of years is set by the state. It is also contingent on the type of contract that was made to take on the debt.
Fact: The shortest statute of limitations for collection is only two years for oral contracts made in California.
These are the four categories of contracts you can make for debt:
- Written contracts
- Oral contracts
- Promissory notes
- Open-end accounts (credit line)
Really, the only two most consumers need to be concerned about are written contracts (like loans) and open-end accounts (like your credit cards).
If you’re curious about that specific statutes in your state, Bankrate has a helpful table that shows the 4 types of statutes of limitations in each state.
Be careful about resetting the clock
This is where things can get complicated, because the way the law is written, you can actually do things – i.e. take certain actions – that reset the clock for the statute of limitations. That means the collector has more time to sue you and ask the courts to make you pay – through things like wage or tax refund garnishment.
Here are three things you can do that reset the statute:
- You acknowledge the debt as yours. If the collector gets you on the phone and you admit that you owe that particular debt, the collect is instantly reset.
- You make any payment – even a partial payment – on the debt.
- You ignore a notice about a legal suit on the debt.
The first two are where most people get caught. The collector gets you on the phone and you tell them, “Yes, the debt is mine, but I’m not going to pay because…”
You’ve reset the clock and now the collector has more time to use garnishment and other court-provided actions to make you pay. And for those consumers that just make a partial payment to get a collector to shut up, you’re actually not doing yourself any favors either. Keep in mind, the statute of limitations can be up to 15 years, but sometimes it’s only three.
Note that a cease and desist letter to a collector does not necessarily acknowledge a debt as yours. So by the FDCPA regulations, you can send the letter that stops collector contact by telling them you do not acknowledge the debt and wish them to cease all further contact. If they contact you again except through the courts, they violate the FDCPA and you can seek compensation for collector harassment.
Collection after the statute expires
Now here’s another catch: According to the letter of law as it was established by the Fair Debt Collection Practices Act, the statute of limitations on debt collection only applies a collector’s ability to sue you or file through the court to collection their money.
So basically, the way the law is written, a collector can still try to collect even after the statute of limitations expires. They just can’t use the courts or the U.S. legal system to do it. So instead, they try everything they can to get you to pay even though the law says you’re no longer legally obligated – and they’re certainly not going to tell you the statute expired, so it’s up to you to know when it does.