Your State’s Statute of Limitations governs the amount of time a creditor or collection agency can
sue you for a debt. After the statute of limitations expired, the original creditor or the collection
agency cannot bring a lawsuit against you for the debt. This does not mean a creditor or debt
collector cannot attempt to collect the debt. It just means you cannot be taken to court or sued
after the statute of limitations has expired.
sue you for a debt. After the statute of limitations expired, the original creditor or the collection
agency cannot bring a lawsuit against you for the debt. This does not mean a creditor or debt
collector cannot attempt to collect the debt. It just means you cannot be taken to court or sued
after the statute of limitations has expired.
Statute of Limitations on Debt:
Debt Settlement may not be necessary
by Lisa Phillips
Debt Settlement may not be necessary
by Lisa Phillips
How to Calculate the Statute of Limitations
To calculate the statute of limitations start with the date you made your last payment (no other
payments have been made on that account since then). For example:
What if you have moved to another State
If you incurred a debt in one state but moved to another state, the statute of limitations may not
be the same for each state. In this case, the creditor or collection agency can choose to use the
state with the longer statute.
Re-Starting the Statute of Limitations Date
The statute of limitations can be restarted, even if has expired, in some states simply by making a
payment on the old debt, acknowledging you owe the debt or making a written promise to pay the
debt. Your strongest weapon against a debt collector is an expired statute of limitations. They are
hoping you are not aware of this when they contact you about an expired debt. Do not get on the
telephone with a collection agency, deal in written communication only. Always send the letter via
certified mail, return receipt. Be sure to state in the letter "this is not an acknowledgment of
the debt and the statute of limitations has expired!"
Credit Reporting Agencies and Negative Marks
According to the FCRA negative marks can remain in your credit files for 7 years, after which
time the negative mark and the related collection must be deleted. The length of time starts from
the time you were late or the late payment went into collection. It does not start from the last time
you made a payment on the account. Some collection agencies will fraudulently update their
reporting status in order to keep the account active thereby extending the time the account
appears on your report. If this occurs dispute it with the credit reporting agencies and they have
to honor the original 7 year reporting date.
State Statutes vs. Credit Reporting Agencies
Once the 7-year mark has been reached negative entries will drop off your credit report. This is
not the same thing as your state's statute of limitations on debt. Even though a debt may no
longer legally appear on your credit reports after 7 years, you could still be sued for the debt if
the statute of limitations for your debt in your state has not expired. You may want to pay an old
debt even if the statute of limitations has expired if it is still on your credit report. In this instance,
use the expired statute of limitations to negotiate the debt and get a deletion.
Be careful when Contacting Old Creditors
Some states have a provision that extends the statute of limitations if you make a payment on an
old debt or acknowledge that you owe the debt. A good faith effort to pay or settle an old debt
may turn into a huge negative mark on your credit report which could potentially be reported for
another seven years. Always negotiate deletions when paying old debts and get everything in
writing.
Dealing with Collection Agencies
Collection agencies can be unscrupulous in collecting a debt. If you decide to pay a collection
agency, always negotiate a deletion and never pay what they are asking. Negotiate a reasonable
settlement without ever acknowledging you owe the debt. See Debt Settlement for more
information. If you are dealing with the original creditor you can still negotiate a favorable
settlement but you may not be able to negotiate a full deletion. Request the original creditor
report the debt as “paid as agreed”. If the credit report says “settled” it’s often worse than the
original negative mark and will not improve your credit scores.
What's My State's Statute of Limitations on Debt?
Each State has it's own Statute of Limitations on Debt. Certain debts do not have a Statute of
Limitations such as Student Loans, Income Taxes and Child Support. Keep in mind State
Statutes can and do change so it is imperative to look at your State's Statutes to ensure the
accuracy of the Statute of Limitations.
Statute of Limitations Listed by State
To calculate the statute of limitations start with the date you made your last payment (no other
payments have been made on that account since then). For example:
- You made a payment on an account in June 10, 2004 and no further payments have been
made. July 2004 becomes your first date of delinquency (DOFD).
- Let's say you live in California where the statute of limitations is 4 years on "open-ended
accounts."
- Now add 4 years to the July 10, 2004.
- The statute of limitations runs July 10, 2008.
- The creditor nor the collection agency can sue you for this debt.
What if you have moved to another State
If you incurred a debt in one state but moved to another state, the statute of limitations may not
be the same for each state. In this case, the creditor or collection agency can choose to use the
state with the longer statute.
Re-Starting the Statute of Limitations Date
The statute of limitations can be restarted, even if has expired, in some states simply by making a
payment on the old debt, acknowledging you owe the debt or making a written promise to pay the
debt. Your strongest weapon against a debt collector is an expired statute of limitations. They are
hoping you are not aware of this when they contact you about an expired debt. Do not get on the
telephone with a collection agency, deal in written communication only. Always send the letter via
certified mail, return receipt. Be sure to state in the letter "this is not an acknowledgment of
the debt and the statute of limitations has expired!"
Credit Reporting Agencies and Negative Marks
According to the FCRA negative marks can remain in your credit files for 7 years, after which
time the negative mark and the related collection must be deleted. The length of time starts from
the time you were late or the late payment went into collection. It does not start from the last time
you made a payment on the account. Some collection agencies will fraudulently update their
reporting status in order to keep the account active thereby extending the time the account
appears on your report. If this occurs dispute it with the credit reporting agencies and they have
to honor the original 7 year reporting date.
State Statutes vs. Credit Reporting Agencies
Once the 7-year mark has been reached negative entries will drop off your credit report. This is
not the same thing as your state's statute of limitations on debt. Even though a debt may no
longer legally appear on your credit reports after 7 years, you could still be sued for the debt if
the statute of limitations for your debt in your state has not expired. You may want to pay an old
debt even if the statute of limitations has expired if it is still on your credit report. In this instance,
use the expired statute of limitations to negotiate the debt and get a deletion.
Be careful when Contacting Old Creditors
Some states have a provision that extends the statute of limitations if you make a payment on an
old debt or acknowledge that you owe the debt. A good faith effort to pay or settle an old debt
may turn into a huge negative mark on your credit report which could potentially be reported for
another seven years. Always negotiate deletions when paying old debts and get everything in
writing.
Dealing with Collection Agencies
Collection agencies can be unscrupulous in collecting a debt. If you decide to pay a collection
agency, always negotiate a deletion and never pay what they are asking. Negotiate a reasonable
settlement without ever acknowledging you owe the debt. See Debt Settlement for more
information. If you are dealing with the original creditor you can still negotiate a favorable
settlement but you may not be able to negotiate a full deletion. Request the original creditor
report the debt as “paid as agreed”. If the credit report says “settled” it’s often worse than the
original negative mark and will not improve your credit scores.
What's My State's Statute of Limitations on Debt?
Each State has it's own Statute of Limitations on Debt. Certain debts do not have a Statute of
Limitations such as Student Loans, Income Taxes and Child Support. Keep in mind State
Statutes can and do change so it is imperative to look at your State's Statutes to ensure the
accuracy of the Statute of Limitations.
Statute of Limitations Listed by State
Do not get the Statute of Limitations (SOL)
confused with FRCA reporting rules and how
long negative information will stay on your
credit reports. Even though you cannot be
sued for debt after the SOL has expired, the
debt can still be on your credit report. Under
FCRA Rules, credit reporting agencies may
report a negative debt up to seven years and
bankruptcies, judgments and tax liens up to
ten years.
confused with FRCA reporting rules and how
long negative information will stay on your
credit reports. Even though you cannot be
sued for debt after the SOL has expired, the
debt can still be on your credit report. Under
FCRA Rules, credit reporting agencies may
report a negative debt up to seven years and
bankruptcies, judgments and tax liens up to
ten years.
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Oral Agreement: An oral agreement or contract, sometimes referred to as a "handshake a
contract is a legally enforceable promise or set of promises, the oral agreement is a lot harder
to prove in court. Money loaned between friends is often done without a written contract.
Written Contract: A written contract is an agreement to pay a loan according to the terms
written in a printed document. The written contract is signed by the lender and borrower or
borrowers and is legally enforceable in court. Written contracts are much easier to prove.
Promissory Note: A promissory note is a written contract that explicitly states scheduled
payments, interest rate and consequences of defaulting. It is a specific promise to pay and
spelled out in the promissory note. An example of a promissory note is a mortgage loan.
Open-Ended Account: An open-ended account is a revolving line of credit with varying
balances. Credit cards are an example of open-ended accounts.
contract is a legally enforceable promise or set of promises, the oral agreement is a lot harder
to prove in court. Money loaned between friends is often done without a written contract.
Written Contract: A written contract is an agreement to pay a loan according to the terms
written in a printed document. The written contract is signed by the lender and borrower or
borrowers and is legally enforceable in court. Written contracts are much easier to prove.
Promissory Note: A promissory note is a written contract that explicitly states scheduled
payments, interest rate and consequences of defaulting. It is a specific promise to pay and
spelled out in the promissory note. An example of a promissory note is a mortgage loan.
Open-Ended Account: An open-ended account is a revolving line of credit with varying
balances. Credit cards are an example of open-ended accounts.
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