A statute of limitation refers to the amount of time that an individual has to bring a lawsuit. Statutes of limitations can vary depending on the type of case and they can also vary state by state.

When it comes to debt collection, a statute of limitation is the amount of time that a creditor can ask the court to force a debtor to pay. Because the court system does not keep track of the statute on your debt, it is your responsibility to prove that the debt has passed its statute of limitation.

What are the Different Types of Debt?

There are four main types of debts and it is important to know which type of debt you have because the statute of limitation is different for each type. If you are not sure regarding what type of debt you have, it is important to check with an attorney. The four types of debt are:

  • Oral Agreements: These refer to debts which were incurred based on an oral contract. In this type of contract, you only made a verbal agreement to pay back the money and there is nothing in writing.
  • Written Contracts: These refer to debts which come from a contract that was signed by you and the creditor. 
    • A written contract must include the terms and conditions of the loan such as the amount of the loan as well as the amount of the monthly payment.
  • Open-Ended Accounts: These are accounts with a revolving balance that you can repay and then borrow again. 
    • Examples of open-ended accounts are credit cards and lines of credit. If you can only borrow the money on time, then it is not considered an open-ended account.
  • Promissory Notes: These are written agreements to pay back a debt in certain payments, at certain interest rate and by a certain date and time. 
    • Some examples of promissory notes are mortgages and student loans.

What are Time-Barred Debts?

Time-barred debts are debts that have passed the statute of limitation. This means that creditors and debtor collectors will not be able to sue you for this debt because the statute of limitation has expired.

However, this does not mean that you do not owe money just because the debts have aged past the statute of limitation. But if the statute of limitation has expired, this means that the creditor will not get a judgment against you as long as you can show the court proof that your debt is too old. Some examples of proof are your own records of communication that you have made regarding that debt or a personal check which shows the last time you made a payment.

What Happens to Time-Barred Debts?

The Fair Debt Collection Practices Act prohibits debt collectors from suing or even threatening to sue you for a time-barred debt but it is possible that some debt collectors may violate these provisions. If you happen to be sued for a time-barred debt, it is important not to ignore it on the assumption that it will take care of itself or that it does not matter because the statute of limitation has expired.

The creditor or collector could obtain a default judgment against you and an order to garnish your wages if you do not pay the judgment. Thus, if you are improperly sued for a time-barred debt, it is important to provide the court with proof that the statute of limitation has expired.

Also, it is important to remember that collection activity is still allowed on time-barred debt and just because the statute of limitation has expired, this does not mean that the creditor cannot still come after you for the debt.

Creditors and debt collectors can still collect time-barred debts with calls and letters as long as they are doing it within the bounds of the law. Also, time-barred debts can appear on your credit reports if the credit reporting time limit has not expired.

What are the Laws Regarding the Statute of Limitation for Debt Collection?

The statutes of limitations for debt collection vary state by state and they also vary based on the type of debt that you have. For example, in the state of California, the statute of limitation for debts incurred from oral contracts is 2 years while for debts incurred from written contracts, promissory notes or open-ended accounts, it is 4 years.

In contrast, in the state of Florida, the statute of limitation for debts from oral contracts and open-ended accounts is 4 years while it is 5 years for debts from written contracts or promissory notes.

Should I Contact a Lawyer If I Have a Debt that Might Be Impacted by the Statute of Limitations?

If you owe debt and you are not paying it, you can be sued by your creditors and by debt collectors. However, if the statute of limitation has expired on a particular type of debt, then creditors and debt collectors will not be able to sue you. Be sure to check before you choose not to pay the debt.

However, if you are being sued and the statute of limitations has not expired yet, it is important to consult with an experienced collection attorney before proceeding.