Statute of Limitations on Debt Collection

Are your debts past their collection lifetime? This chart will tell you how long you have before you no longer have to pay on a debt. It varies, based on state laws and when the last activity occurred on the account.

The first thing you should know is there are different types of contracts and each has their own set of rules. An oral agreement (or contract), written contract, open-ended accounts, and a promissory note.

Oral Contract: You verbally agree to pay money loaned to you by someone. There is no written contract. Commonly referred to as a “handshake agreement”.

Written Contract: A signed agreement between you and the creditor that you agree to pay on a loan, under the terms of the contract.

Promissory Note: A written contract that the scheduled payments and interest on the loan are described in the promissory note. An example would be a mortgage.

Open-ended Accounts: These are revolving lines of credit with varying balances. The best example is a credit card account. Please note: a credit card is ALWAYS an open account. This is established under the Truth-in-Lending Act:

Which states apply?

For normal loans, its the state in which you signed the loan contract. For credit cards, its the state where the credit card headquarters is located. So you can find out how long before a debt you have is under it’s statute by looking up the statue for the appropriate state. If its outside the statute, you will know you can no longer be sued for the debt.

(Below is a table showing the SOL for each state)

State Oral Written Promissory Open-ended Accounts State Statute: Open Accounts
AL 6 6 6 3 §6-2-37
AR 3 5 5 3 §16-56-105
AK 6 6 3 3 §09.10.053
AZ 3 6 6 3 §12-543
CA 2 4 4 4 §337
CO 6 6 6 3 §13-80-101
CT 3 6 6 3 §52-581
DE 3 3 3 4 §2-725
DC 3 3 3 3 §12-301
FL 4 5 5 4 §95.11
GA 4 6 6 6 ** §9-3-25
HI 6 6 6 6 HRS 657-1(4)
IA 5 10 5 5 §614.5
ID 4 5 5 4 §5-222
IL 5 10 10 5 735 ILCS 5/13-205
IN 6 10 10 6 §34-11-2
KS 3 6 5 3 §84-3-118
KY 5 15 15 5 §413.120
LA 10 10 10 3 §3-118
ME 6 6 6 6 §14-205-752
MD 3 3 6 3 §5-101
MA 6 6 6 6 c.260, §2
MI 6 6 6 6 §600.5807
MN 6 6 6 6 §541.05
MO 5 10 10 5 §516.120
MS 3 3 3 3 §15-1-29
MT 5 8 8 8 27-2-202
NC 3 3 5 3 §1-52(1)
ND 6 6 6 6 28-01-16
NE 4 5 5 4 §25-206
NH 3 3 6 3 382-A:3-118
NJ 6 6 6 6 2A:14-1
NM 4 6 6 4 §37-1-4
NV 4 6 3 4 NRS 11.190
NY 6 6 6 6 §2-213
OH 6 15 15 6 §2305.07
OK 3 5 5 3 §12-95
OR 6 6 6 6 §12.080
PA 4 4 4 4 §5525
RI 10 5 6 4 §6A-2-725
SC 3 3 3 3 SEC 15-3-530
SD 6 6 6 6 §15-2-13
TN 6 6 6 6 28-3-109
TX 4 4 4 4 §16.004
UT 4 6 6 4 78B-2-307
VA 3 5 6 3 8.01-246
VT 6 6 5 3 §3-118
WA 3 6 6 3 RCW 4.16.080
WI 6 6 10 6 893.43
WV 5 10 6 5 §55-2-6
WY 8 10 10 8 §1-3-105

** Georgia Court of Appeals came out with a decision on January 24, 2008 in Hill v. American Express that in Georgia the statute of limitations on a credit card is six years after the amount becomes due and payable

This table is provided for informational purposes only and should not be taken for legal advice.

What Does This Mean for You?

This information can be a powerful weapon in relieving yourself of old debts, as creditors have a limited time in which to sue you. Remember: the SoL time clock starts from the day the debt – or payment on an open-ended account – was due. When the timeline expires, the debt becomes time-barred.

Keep in mind this has nothing to do with how long a negative credit remains on your credit report. The statute of limitations for credit reporting is a separate timeline. It is 7 years in every state and it doesn’t change.

Do not make the mistake of thinking the SoL causes your debt to go away after it expires! If the creditor files suit, you do have an absolute defense (the SOL has expired). But you must offer evidence in court to avoid a judgement. If the creditor sues you, and there is no proof to show the court that the Statute of Limitations expired, you will lose the lawsuit and a judgment against you. Tell the judge your debt is time-barred with some proof – and you’re off the hook.

When Does the SoL Start?

There are various opinions on when the SOL starts

  • The first time you fail to make a payment on your account.
  • The credit card company sends you a demand letter for the full amount.

Either of these can be true, depending on the credit card agreement. Here’s why:

The length of the statute of limitations, or limitations of action statute, varies from state to state and the type of agreement (i.e. oral, written, etc.) The one aspect of a statute of limitations that is pretty constant throughout all of US states’ laws is when it begins to run.

The statute begins to run when you have done “something” that goes against the terms of your agreement. Most of the time, that something is failure to pay your bill. When you don’t make your payment on time, you violate the terms of your agreement and causes the creditor to take action.

If the creditor fails to sue you in the within your SoL timeline (oral, written, etc), you have an affirmative defense against the creditor’s claim which can halt the recovery of the debt. In other words, you can no longer be sued over the debt, and can’t get a judgment.

What Does a Partial Payment Do?

Depending on what state you live in, if you make a partial payment,you could reset your SoL timeline. Never make a partial payment on an old debt unless you have a settlement agreement in place.

Some states have laws which specify that a partial payment does not restart the SoL clock, unless there is a new written promise to pay.  Meaning that you have to actually write a new agreement with the original creditor.

If you live in one of these states, simply sending in a check doesn’t restart the clock. The statute of limitations is only extended by new written promise to pay in these states:

Arizona, California, Florida, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New York, Texas, Virginia, West Virginia, Wisconsin.

You may also wish to read the FTC’s publication on Time Barred Debts for further information.

 

Leave a Reply
Have questions or comments? Post them below: