Got debt? The statute of limitations is something you need to know about. If you don’t know about this, you could make some basic mistakes that could cost you thousands of dollars!
What does “debt statute of limitations” mean?
When it comes to debt, the statute of limitations determines how long a debt collector can pursue a debt. If a debt collector waits too long, they can’t sue you or take other action against you.
Although you still owe the debt, there’s nothing a collector can do to force you to pay. They can still call you, write letters and ask you to pay but they can’t sue. In fact, you can request in writing that they stop contacting you about the debt, and then they can’t do anything at all!
This ensures that old debts won’t haunt you forever.
Why do you need to know about it?
There are two huge reasons why everyone needs to know about the debt statute of limitations:
You can accidentally reset the clock on your debts.
The clock always begins ticking on the date of your first missed payment. That’s why it’s important to understand how this works.
For example, let’s say Sarah’s last credit card payment was 5 years and 11 months ago. She lives in a state where the statute of limitations is six years. She’s one month away from being untouchable by the creditor.
However, the company called and asked her to make a payment. If Sarah pays anything – even just a few dollars – it’s going to reset the statute of limitations. Suddenly, her last payment was today so the statute of limitations won’t run out for another six years.
If you don’t know about the debt statute of limitations, you could accidentally put yourself in a position where the debt collector has more time to sue you. As time runs out, debt collectors love to engage in deceptive tactics to try to get you to reset that clock.
You need to protect yourself if you get sued for a time-barred debt.
Next, sometimes debt collectors file lawsuits without checking all the facts. You could be sued for a debt that is outside of the debt statute of limitations. These debts are called “time-barred debts.” It’s up to you to recognize that the debt is time-barred and bring that to the attention of the courts.
What is the statute of limitations?
The statute of limitations varies by state and type of debt. Depending on where you are and what you owe, the statute ranges from 2 years to 15 years.
Keep in mind that there are reasons to pay a debt that is “time-barred.”
For example, the credit reporting time limit states that delinquent debts can remain on your credit report for an average of seven years. The only way to remove that negative mark from your credit report is to pay it.
There are four different types of debt.
There are four primary types of debt. These include oral agreements, written contracts, promissory notes, and open-ended accounts.
Oral agreements have no written documentation.
Oral agreements are strictly verbal. There is nothing in writing to verify or back up these contracts.
Written contracts include terms and conditions.
Written contracts include terms and conditions. They usually include the amount of the loan and other relevant details.
Even if it’s just written on a napkin, a written contract is binding between both parties.
Promissory notes are specialized written contracts.
Promissory notes are more complicated than straight written contracts. Specifically, promissory notes are written agreements to repay the debt in certain payments, with a particular interest rate and with a deadline. For example, mortgages are a type of promissory note.
Open-ended accounts are accounts with revolving balances.
An open-ended account doesn’t have an end date. As long as you keep the account in good standing, you can repay it and borrow it and repay it again. Credit cards and in-store credit are types of open accounts.
The statute of limitations for each debt type varies by state.
This is the list of debt statute of limitations in all 50 states.
| State | Oral | Writ | Prom | Open |
|---|---|---|---|---|
| Alabama | 6 | 6 | 6 | 3 |
| Alaska | 6 | 6 | 3 | 3 |
| Arizona | 3 | 5 | 6 | 3 |
| Arkansas | 3 | 6 | 3 | 3 |
| California | 2 | 4 | 4 | 4 |
| Colorado | 6 | 6 | 6 | 6 |
| Connecticut | 3 | 6 | 6 | 3 |
| Delaware | 3 | 3 | 3 | 4 |
| Florida | 4 | 5 | 5 | 4 |
| Georgia | 4 | 6 | 6 | 6 |
| Hawaii | 6 | 6 | 6 | 6 |
| Idaho | 4 | 5 | 5 | 5 |
| Illinois | 5 | 10 | 10 | 5 |
| Indiana | 6 | 10 | 10 | 6 |
| Iowa | 5 | 10 | 5 | 5 |
| Kansas | 3 | 5 | 5 | 3 |
| Kentucky | 5 | 10 | 15 | 5 |
| Louisiana | 10 | 10 | 10 | 3 |
| Maine | 6 | 6 | 6 | 6 |
| Maryland | 3 | 3 | 6 | 3 |
| Massachusetts | 6 | 6 | 6 | 6 |
| Michigan | 6 | 6 | 6 | 6 |
| Minnesota | 6 | 6 | 6 | 6 |
| Mississippi | 3 | 3 | 3 | 3 |
| Missouri | 5 | 10 | 10 | 5 |
| Montana | 5 | 8 | 8 | 5 |
| Nebraska | 4 | 5 | 5 | 4 |
| Nevada | 4 | 6 | 3 | 4 |
| New Hampshire | 3 | 3 | 6 | 3 |
| New Jersey | 6 | 6 | 6 | 6 |
| New Mexico | 4 | 6 | 6 | 4 |
| New York | 6 | 6 | 6 | 6 |
| North Carolina | 3 | 3 | 5 | 5 |
| North Dakota | 6 | 6 | 6 | 6 |
| Ohio | 15 | 15 | 15 | 6 |
| Oklahoma | 3 | 5 | 5 | 3 |
| Oregon | 6 | 6 | 6 | 6 |
| Pennsylvania | 4 | 4 | 4 | 4 |
| Rhode Island | 10 | 10 | 10 | 10 |
| South Carolina | 3 | 3 | 3 | 3 |
| South Dakota | 3 | 6 | 6 | 6 |
| Tennessee | 6 | 6 | 6 | 6 |
| Texas | 4 | 4 | 4 | 4 |
| Utah | 4 | 6 | 6 | 4 |
| Vermont | 6 | 6 | 5 | 3 |
| Virginia | 3 | 5 | 6 | 3 |
| Washington | 3 | 6 | 6 | 3 |
| West Virginia | 5 | 10 | 6 | 5 |
| Wisconsin | 6 | 6 | 10 | 6 |
| Wyoming | 8 | 10 | 10 | 8 |
Your best bet is to settle that debt!
Do you have outstanding debts that haven’t exceeded the debt statute of limitations yet? We’ve got a helpful guide that can help you settle your debts for 50% or less of the original amount owed. We’ve used these techniques ourselves, so we know they work! Check out our DIY debt settlement guide here.