What is the Statute of Limitations on Debt?
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What Is the Statute of Limitations on Debt?
A statute of limitation prohibits lenders from sueing debtors after a certain period, but the debt will remain on your credit report.
Written by Sean Pyles Senior Writer | Personal financial and debt Sean Pyles leads podcasting at NerdWallet as the host and producer of the NerdWallet’s “Smart Money” podcast. The show “Smart Money” Sean talks with Nerds on NerdWallet’s NerdWallet Content team to answer the questions of listeners about their personal finances. With a focus on thoughtful and actionable money advice, Sean provides real-world guidance to help people improve in their finances. Beyond answering listeners’ money questions on “Smart Money” Sean also interviews guests outside of NerdWallet and also creates special segments that explore subjects such as the racial wealth gap and how to begin investing, and the history of student loans.
Before Sean lead podcasting at NerdWallet the company, he also wrote about topics that dealt with consumer debt. His writing has been featured throughout the media including USA Today, The New York Times as well as other publications. When he’s not writing about personal finance, Sean can be found working in his garden, going for walks, or taking his dog on long walks. He lives at Ocean Shores, Washington.
August 5, 2021
Written by Kathy Hinson Lead Assigning Editor Personal finances, credit scoring managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. Previously, she spent 18 years at The Oregonian in Portland in roles including copy desk chief and team leader for design and editing. Her previous experience includes news and copy editing at several Southern California newspapers, including the Los Angeles Times. She received a bachelor’s degree in mass communications and journalism from the University of Iowa.
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The statute of limitations on debt is a law that limits how long a creditor can sue you for payment on the debt.
Every consumer’s debt, ranging from debts from credit cards as well as medical expenses, come with restrictions on the amount of years creditors have the legal right of suing you for repayment.
Typically, the law of the state where you live sets the time limit for specific debts, even if you incurred your debt somewhere else. In certain states the statute of limitations is 3 years. In others, it’s up to 10.
The rules vary from states to states. There are 22 states in which, for example, the is six years. However, some lenders add clauses to their agreements which state that the laws of the state will govern the contract regardless of the state where the consumer lives.
Be aware of the pitfalls if a creditor is hounding you because just one payment on an expired debt could reset the clock and revive the creditor’s ability to take legal action against you.
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What can you tell if a debt is time-barred
When the time limit on debt passes the debt is deemed ” ” and you aren’t able to legally sue However, creditors can continue to pursue.
The obligation to pay however, remains on the books. This means that any future creditors will notice the obligation, which could make it harder for you to get new lines of credit, and those you do receive will have higher interest rates.
“Determining whether a debt is past its statute involves considering the kind of debt it’s and the statutes that apply to it,” says Colin Hector, staff attorney of the Federal Trade Commission. “You need some legal acumen, so you may want to contact lawyers, legal aid or the office of the state’s attorney general.”
These sources can assist you in determining the deadline for your debts. The best choice for you will depend on your budget and time:
: Can provide free legal information , but could be difficult to reach.
Cost: Cheap, but attorneys and paralegals are often overwhelmed and understaffed.
The ability to offer personal and speedier assistance, but at a higher cost.
Getting information from the collector
Debt collectors are legally obligation to provide you with information about the debt they’re trying to collect. Inquiring for more details will help you determine if a debt is beyond the time limit for repayment.
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Be cautious when talking with collectors. Do not promise to make a payment or provide them with any payment information, such as a bank account, because they could interpret that as acceptance for the obligation.
If you recognize the debt as yours
Collect all information you have on it, such as the amount, any payment you made and the date of your last payment. This serves as your arsenal against the debt collectors.
The collector should be asked two simple questions:
Do you know if the debt is time-barred?
When was the date of your last installment?
If the debt collectors are able to answer one of the questions, they are required by law to answer the question truthfully. But, they aren’t required to answer it at all.
If the collector does not respond you, inquire regarding the date of your last payment. The timer for the statute of limitations kicks in when the account is delinquent, typically 30 days after missing a payment.
If you’re not making payment, your clock may have started when you paid off the debt or the date it was declared in default, based on your state.
If a debt collector won’t divulge this information, refer to the debt validation letter. A collector must send you this letter within five days after the initial contact; if you haven’t received it in 10 days, you should request it. This notice should include the amount due, dates of payment, the payment, the collector and the procedure to obtain information about the original creditor.
If you don’t acknowledge the debt, you will be in trouble.
The business of debt collection is well-known for trying to collect on debts from wrong individuals. Since debts are transferred by the original creditor to a third party and possibly transferred to a debt collector will likely have less and less precise details. This means that you might be asked to settle a debt that’s not yours at all.
Review your own documents as well as the confirmation letter in order to resolve any inconsistencies. This will help you decide whether or not you should contest the debt.
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The author’s bio: Sean Pyles is the executive producer and host for the NerdWallet’s Smart Money podcast. His writing has appeared on The New York Times, USA Today and elsewhere.
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