Most statutes of limitations on debt fall in the three-to-six-year range, but it can depend on the type of debt. The topic isn’t cut and dried. Knowing finances and how your debts work is vital to protecting your credit score and financial future. So if you’re being receiving creditor calls, keep reading to find the answer to, “Is there a statute of limitation on debt?”
What is a Statute of Limitations on Debt?
A statute of limitations is the time a creditor has to sue you for a debt. After this time has passed, they can no longer sue you. Each state has its own limitations, which is why it’s essential to research the laws of each jurisdiction.
How Does a Statute of Limitations Work?
How it works depends on your state’s laws. For some, it begins as soon as you fall behind on your payments. Other regulations reset the statute if you make a payment, even if it’s only a tiny amount.
So, it’s essential to know your state’s limitations and keep track of when the statute of limitations expires. Knowing finances is the best way to protect your bottom line.
Do All Debts Have a Statute of Limitation?
Not all debts have a statute of limitations. For example, unpaid taxes have no statute of limitations. And some courts have ruled that student loans don’t have a statute of limitations, which is why it’s challenging to discharge these debts in bankruptcy. Most state laws cover most types of debt, including:
- Credit card
- Loans (Personal, student, mortgage, and auto)
- Household debts
These regulations are only for personal/household balances. Amounts a business owes to another business fall under a different statute.
Can Creditors Collect After the Statute Expires?
A few things can happen after the statute of limitations expires. First, the creditor can still try to collect the debt. You must show up to the court date and use the statute of limitations as your defense. It’s also vital to prove that there’s been no activity on the account in years.
If you fail to appear before the judge or the creditor can show you’ve been aware of the debt, they can get a judgment against you and require you to pay the total amount. Acknowledging the bills can be simply responding to a collection letter or call. Knowing finances and state laws can help you protect yourself from debt collectors.
Does a Collection Agency Have the Same Limits?
Yes, the statute of limitations is the same for both the original creditor and any collection agency they sell the debt to. Also, they have the same power to take you to court if the debt is beyond the statute of limitations.
It’s vital to understand the statute of limitations in any state doesn’t stop debt collection. It only reduces the chances of a win in court for the collector.
What If I Move to a New State?
If you move to a new state, the debt still falls under the jurisdiction of where it was incurred. So, the statute of limitations still applies. Keep in mind that there are variations between states, so it’s important to do your research before you move. Also, if laws are more lenient in your new location, it might be easier for the collector to take you to court.
What If You Ignore the Debt?
If you ignore the debt, the creditor can get a judgment against you. This can negatively affect your credit score, and the creditor can take legal action to get the money you owe. Knowing finances is the best way to prevent this scenario. Keep a close eye on your bills with an app or service that offers due date reminders and other helpful tools.
Is there a statute of limitations on debt? It depends on your state. Check with a lawyer to find out the specific statute of limitations in your state.