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If you don’t pay back your debts, debt collectors can pursue legal action. But once your outstanding debt has passed the statute of limitations in your state, creditors can no longer sue you. This isn’t a ‘wipe the slate clean’ deal, though. Unpaid debts can affect your credit and financial future.
In the most basic terms, the statute of limitations on debt is an expiration date. It applies to oral and written contracts, promissory notes (such as student loans), and open-ended accounts (like credit cards). Once a certain number of years have passed, creditors and debt collectors can no longer legally sue you for payment. At that point, the debt is “time-barred.” If a creditor files a lawsuit or threatens to do so, that’s a violation of the Fair Debt Collection Practices Act.
The time period differs between states, and typically starts on the account’s last date of activity – which is usually the date of your first missed payment.
While the statute of limitations can save you from going to court to pay an old debt, it doesn’t make the debt magically disappear. Creditors can still contact you about delinquent debt, and report it to the major consumer credit bureaus: TransUnion, Experian and Equifax. That means it will show up on your credit report for up to seven years, and may damage your credit and affect your financial standing.
If you’re struggling with debt, you can engage a debt relief company to help you to eliminate some or all of your debt.
Debt falls into one of four categories. There are time limits for each type of debt, so if you’re unsure about the kind of debt you have, check with your creditor or attorney.
The statute of limitations starts on the last date of activity on the account. If you engage with the account in any way, the clock restarts – giving your creditors much more time to sue you for the debt you owe. The action can be anything from making a payment, promising to pay, or signing an agreement.
To confirm the last date of activity on the account, check your credit report or ask your creditor. It could be the last time you submitted a payment, entered a payment arrangement, or acknowledged ownership of the debt.
The statute of limitations on debt varies between states. Depending on the type of debt you have, it’s usually between three and six years, but it’s as high as 15 in some states. Once a delinquent debt is older than the statute of limitations in your state, debt collectors no longer have the right to sue you for payment. You might still have a moral obligation cough up the money, but you can’t be taken to court.
This chart breaks down the statute of limitations on debt in each state in terms of years:
|Georgia||4||6||6||4, or 6 for credit cards|
Debt collectors may still use your original state for the statute of limitations if the time limit is longer than the state you’re currently living in.
Contact your creditor – but be careful about what you say. Ask them if the debt is a time-barred debt, or for the date of your first missed payment. Remember, any action you take regarding payment will restart the clock on the statute of limitations. To avoid that, don’t make a payment (even a partial one) or promise to do so.
If the statute of limitations has expired but your debt collector is still in contact, you can send them a letter requesting they stop all communication.
This federal law protects you in more ways than one. Here’s the gist:
When a debt is time-barred, it just means your creditors can’t legally force you to pay up. This may sound ideal, but an unpaid debt can affect your credit for years to come. Another option is exploring debt settlement. These debt relief companies will be able to help.
Before you sign up with a debt relief company
Debt relief companies typically charge a percentage of a customer’s debt or a monthly program fee for their services. And not all companies are transparent about these costs or drawbacks that can negatively affect your credit score. Depending on the company you work with, you might pay other fees for third-party settlement services or setting up new accounts, which can leave you in a worse situation than when you signed up.
Consider alternatives before signing up with a debt relief company:
Unfortunately, reaching the statute of limitations doesn’t erase the debt. The only way to do that is to pay it, get it cancelled, or have it discharged via bankruptcy.
The statute of limitations restricts creditors from suing you in court, but it doesn’t do the following:
Having debt hanging over your head can be stressful – even if it’s bounced between creditors for years. The statute of limitations on debt stops the cycle, and means that you can’t be taken to court to pay an old debt. However, it doesn’t erase the debt.
To explore your options, check out our guide to getting out of debt.
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