Fail to repay a debt in full? If so, keep in mind that it doesn’t just disappear. It’s usually sold to a collection agency, who may hound you about it for years. If that agency doesn’t collect payment, they may pass it on to another. It means you may still get calls and letters about the debt years later.
Surprisingly few consumers know that debts are subject to a statute of limitations. This means that creditors and debt collectors have a certain time limit to collect the old debts or sue. If this time limit lapses, the unpaid debts become “time-barred” debts and they no longer have a case against the debtor. They cannot collect or even file suit because the law protects you for not paying a time-barred debt.
What are the Statute of Limitations On Debt Owed?
The statute of limitations varies according to the type of debt and the state. It may be as short as two years or as long as fifteen. Most states have different statutes for oral agreements, written contracts, promissory notes and open accounts.
Auto and installment loans are written contracts. Credit card debt most often falls under the open accounts category. But in certain instances, such as when you sign a written agreement for getting a credit card, this is often a matter for the court to decide if there is any doubt.
When Does the Statute of Limitations On Debt Begin?
When the statute of limitations begins is a matter of some debates. Some say that it begins on the date of your first delinquency. Others claim that it begins when the creditor sends a demand letter, when the last payment was made or when the debt was written off.
In general, the statute of limitations begins when the creditor has a cause of action. This means different things according to the credit agreement. In some instances, this occurs when the creditor demands payment in full. In others, it occurs when you become delinquent on a debt. If you’re unsure, a consumer rights attorney can help you decide when the statute of limitation starts.
It’s important to note that the statute of limitations can be restarted under certain circumstances. This may occur if you use the account again. It may also occur if you make a partial payment or agree to a payment arrangement.
What If a Creditor Call You for Collecting a Time-Barred Debt?
If a creditor contacts you, you can protect yourself by refusing to acknowledge that you owe the debt or make any kind of payment or agreement. Simply state that your debt is a time-barred debt and assert your FDCPA rights. They will probably either leave you alone or take you to court, where you can defend yourself in the same way.
The fact that a debt still appears on your credit report doesn’t change that the statute of limitations may be up. Knowing the law in your state could save you from paying a debt that cannot be collected. For more information, contact a consumer rights lawyer and learn about debt collection and your rights as a debtor.
Time-barred debts – the FTC