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The debt collection statute of limitations sets a time limit for creditors to seek a judgment on an outstanding balance. The length of time depends on individual contractual agreements and government law. Certain debts, such as government debts, are not included in the statute of limitations. Creditors may still attempt to collect after the statute of limitations expires, but debtors can fight back in court.
The debt collection statute of limitations is the amount of time that an original creditor or third-party collection agency can legally seek a judgment on an outstanding balance. The statute of limitation prevents debt collectors from trying to collect on an account that is past due for an indefinite period of time. Once the statute of limitations has expired, a debtor can fight other collection activities, including lawsuits. The length of time a debt collection agency has to collect a debt generally depends on individual contractual agreements.
Debts included in the statute of limitations collection laws are generally those with written contracts, promissory notes, or oral contracts. The exact deadlines and rules on the debt collection statute of limitations are generally determined by government law. Debts involving written contracts generally have a longer statute of limitations of four to six years, while the debt collection statute of limitations for oral contracts is typically shorter, two to three years.
Government debts, such as student loans, child support, and taxes, are generally not included in the debt collection statute of limitations. These debts can usually be tracked down and reported to the credit bureaus until the balances are paid in full. Generally, governments can use wage garnishments and tax refund intercepts to recover funds owed to any government institution.
The statute of limitations for debt collection is generally unrelated to the length of time a debt can be reported to a credit bureau. Although the creditor can no longer attempt to collect the debt, any unpaid balance can usually be reported to the credit bureaus and negatively affect the debtor’s credit rating. Filing bankruptcy is one way to remove an expired statute of limitations debt from a credit report, but bankruptcy itself can typically be reported for up to ten years.
Certain creditors will occasionally attempt to obtain a debt after the statute of limitations expires. This commonly occurs when a debt has been sold from one third party collection agency to another. If a lawsuit is filed, the debtor should not ignore court notices or court dates. If you do not appear for a hearing involving a debt with an expired statute of limitations, a judgment can be entered against the debtor. It is the debtor’s responsibility to attend the hearings and dispute the creditors’ right to continue collecting the debt.
Smart Asset.
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