The debt collection statute of limitations limits the time a creditor or collection agency can legally pursue a balance owed. The length of time depends on individual contractual arrangements and governmental law. Some debts, such as student loans and taxes, are not included in the statute of limitations. Unpaid balances can negatively impact credit scores, and creditors may still attempt to collect after the statute of limitations has expired. Debtors must attend hearings and challenge creditors’ rights to collect expired debts.
Debt collection statute of limitations is the amount of time that an original creditor or third-party collection agency can legally pursue a judgment for a balance owed. The statute of limitations prevents debt collectors from attempting to collect on an overdue account indefinitely. Once the statute of limitations has expired, a debtor may be able to fight further collection activity, including lawsuits. The length of time a collection agency has to collect a debt typically depends on individual contractual arrangements.
Debts included in statute of limitations on collection laws are generally those with written contracts, promissory notes, or oral contracts. The exact times and rules regarding statute of limitations for debt collection are usually determined by governmental law. Debts involving written agreements typically have a longer statute of limitations at four to six years, while the debt collection statute of limitations for oral agreements is usually shorter, at two to three years.
Government debts such as student loans, child support, and taxes are generally not included in the statute of limitations for debt collection. These debts can normally be pursued and reported to credit bureaus until the balances are paid in full. Governments are generally able to use wage garnishments and tax refund interceptions to recover funds owed to any government institution.
The limitation period for debt collection generally has no bearing on the length of time a debt can be reported to a credit bureau. Even if the creditor can no longer attempt to collect the debt, any unpaid balance can usually be reported to credit bureaus and negatively impact the debtor’s credit score. Filing for bankruptcy is one way to remove a debt with an overdue statute of limitations from a credit report, but bankruptcy itself can normally be filed for up to ten years.
Some creditors will occasionally attempt to pursue a debt after the statute of limitations has expired. This commonly occurs when a debt has been sold by one third-party collection agency to another. If a lawsuit is filed, a debtor must not ignore court notices or hearing dates. Failure to appear at a hearing regarding a debt with an expired statute of limitations can lead to a judgment being issued against the debtor. It is the debtor’s responsibility to attend the hearings and challenge the creditors’ right to continue collecting the debt.
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