Statutes of Limitation on Debt Collection

Collection agencies and debt collection companies are well known for the way they do business. They’re much more concerned with getting paid than with how they go about collecting the debt. As long as they can get a consumer to pay the debt that is owed they care little about consumer’s rights or even whether they are hounding the right person. It is up to consumers themselves to be informed on the laws that deal with collection practices. The statute of limitations on debt plays a big role when it comes to collection agencies and whether they’re in a gray area in terms of collecting debts from consumers. The purpose behind statutes of limitations is to give consumers protection from debts that are very old. Only in the most extreme cases can consumers be collected upon, even decades after the original debt was incurred. In some cases, like credit card debt and other unsecured debt, the statute of limitations is up to seven years since there was activity on the account.

Caution! Curves Ahead!

Some collection agencies try to cheat the system, which is why you should be on your toes as a consumer, even if the debt is actually yours. When it comes to your own personal finances, no one else is going to have your best interest at heart. You should be informed on the laws and rules that govern debt collection. Debt collectors are notorious for their unscrupulous tactics when it comes to trying to get consumers to pay up on past due debt. In many cases, consumers pay off these debts because they continue to appear on their credit reports. Just because the debt appears on your credit report doesn’t necessarily mean you have to pay it. The only time I would pay a debt beyond the statue of limitations was if I knew that I could get them to remove a negative item from my credit report. The statute of limitations on debt is an entirely separate issue from the reporting limits on debt on your credit report.

The Statute of Limitations May Vary By Contract Type

The statute of limitations on a debt is going to be determined by the kind of debt it is. Generally speaking, there are four types of debt that you should know about. Each is treated differently in terms of how long you’re still obligated to pay them.

1. Oral Contracts: The first type of debt contract is an oral contract. You’re obligated to pay on an oral agreement, even if you don’t have a signed piece of paper showing you owe the money, but it is a lot harder to enforce in court.

2. Written Contracts: A written contract is the next type of contract that can obligate a person to pay back a debt. A written contract is exactly what it sounds like; there is a contract that states in writing the amount of money borrowed. The debtor and the creditor have a written agreement that is signed by both parties. This type of contract is binding in court and is easier to enforce because all the terms and conditions of the agreement are in writing.

3. Promissory Notes: A third kind of contract is called a Promissory Note. A Promissory Note is very similar to a contract. It briefly states the terms and agreements of the payment. It is considered a “negotiable instrument”. Promissory notes are written with a “Promise to Pay” statement which includes an outline of how the note will be paid. A good example of a promissory note would be a mortgage. A mortgage not only outlines who owes the money and who is lending the money but also tells when and how the debt will be repaid.

4. Revolving Line of Credit: A revolving line of credit is a credit line opened for the consumer to use at their discretion. The amount borrowed and the terms of repayment can fluctuate based on credit worthiness, market conditions, and a person’s history with the creditor. Two common examples of a revolving line of credit that you might be familiar with are a credit card and a home equity line of credit (HELOC). A revolving line of credit can either be an unsecured or a secured debt.

A note for our readers: whether or not the original creditor or third party collection agency can still collect legally has a lot to do with what kind of contract the person signed. For example, if you do not actually sign a contract when you apply for credit, the agreement may not meet the technical definition of a written contract. In the case of a signed credit application, the statue of limitations on that debt would probably be longer than on an oral contract.

Statute of Limitations By State


State Open-ended Accounts (credit cards) Oral Written Promissory
AL 3 6 6 6
AR 3 3 5 5
AK 3 6 6 3
AZ 3 3 6 6
CA 4 2 4 4
CO 3 6 6 6
CT 3 3 6 6
DE 4 3 3 3
DC 3 3 3 3
FL 4 4 5 5
GA 6 * 4 6 6
HI 6 6 6 6
IA 5 5 10 5
ID 4 4 5 5
IL 5 5 10 10
IN 6 6 10 10
KS 3 3 6 5
KY 5 5 15 15
LA 3 10 10 10
ME 6 6 6 6
MD 3 3 3 6
MA 6 6 6 6
MI 6 6 6 6
MN 6 6 6 6
MO 5 5 10 10
MS 3 3 3 3
MT 8 5 8 8
NC 3 3 3 5
ND 6 6 6 6
NE 4 4 5 5
NH 3 3 3 6
NJ 6 6 6 6
NM 4 4 6 6
NV 4 4 6 3
NY 6 6 6 6
OH 6 6 15 15
OK 3 3 5 5
OR 6 6 6 6
PA 4 4 4 4
RI 4 10 5 6
SC 3 3 3 3
SD 6 6 6 6
TN 6 6 6 6
TX 4 4 4 4
UT 4 4 6 6
VA 3 3 5 6
VT 3 6 6 5
WA 3 3 6 6
WI 6 6 6 10
WV 5 5 10 6
WY 8 8 10 10


*Note: The actual statute of limitations in Georgia is officially 4 years. However, the Georgia Court of appeals came out with a ruling on January 24, 2008 that indicates the statute of limitations on a credit card is 6 years.

Which Jurisdiction is My Credit Card Debt Subject To?

While you should speak with a paralegal or lawyer about specific questions, the jurisdiction determines the statute of limitations. It will probably fall in the jurisdiction where you signed the credit application or credit card agreement. In some cases the jurisdiction would be the state of your home residence. If you no longer reside in the state where you signed the original credit card agreement and the state where you live now has a longer statue limitations than the state where you applied for the credit, the collection agency may attempt to move the venue to the place where they have more time to collect the money they say you owe.

Is My Debt Past the Statute of Limitations?

A simple way to figure out whether the debt that’s being collected is past the statue limitations:

Step one: Find out the date of last activity. This would be the date you last paid on the account or when you first got a letter in the mail demanding payment for any debt because of your delinquency.

Step two: Look at the table below and find the statute of limitations for your state. Subtract the current year from the year of the last activity on the credit account and compare the result to the number of years your state allows a creditor to collect debt. If the number of years on the statute of limitations is smaller than the current year minus the year of last activity, you should be in the clear.

Let’s work through an example. Jim ordered some stuff on his credit card in 2006 and stopped making payments later that year. The bank sold this credit card debt to a third party collection agency who is now trying to collect in 2011. So I take 2006, which is the date of last activity on the account, and I subtract it from 2011 and get five years. Now I look at the state where I made the transaction or where I currently live, whichever one is greater and I compare that number of years to five years. If the number is greater than five, I know whoever is trying to collect the debt has a legal right to pursue me. However, if the statute of limitations is less than five years, I can tell the collection agency to go jump in a lake because I don’t legally have to pay the debt.

Note: If there was an acceleration clause in the credit card agreement, the statute of limitations expired on April 17, 2008.

After this date, you are “safe” from being sued over the debt because you have what is known as an absolute defense. You will not automatically win the lawsuit if you do not present this defense, however. You still have to go to court and raise the defense in order to prevent a judgment against you.

Should I Make a Partial Payment?

Now you may think to yourself that legally the statute of limitations has expired on my debt so I don’t have to pay but since I did technically borrow the money maybe I should make some kind of partial payment. While that is a very noble sentiment, you should realize the implications of what you’re doing. In our example above, the day of last activity was in 2006, but now that you’ve made a payment in 2011 that starts the clock all over again. By making a payment, you are admitting that indeed it is your debt. This not only means they can try to collect the debt but it also means they can take you to court and sue you for the money you have not paid.

What do you do if you are close to the expiration date in terms of statute of limitations? You may have a debt in collections that is close to expiring and you don’t know it. The collection agencies are very aware of the statute of limitations and the fact is if they don’t get their money in time, they have no legal recourse to collect the debt you incurred and they have paid to acquire. In fact, debt collectors and collection agencies may increase the pressure because they know that in a month or two they’ll have no recourse to collect on a debt. It is your obligation and your right as a consumer to be well informed about the statute of limitations in your jurisdiction and what it means to have the debt fall outside that range of collection action. One final note: if, in fact, you have a debt that is outside the statute of limitations and you have some shady collection agency still trying to collect on that debt, you can send a certified letter requesting they no longer contact you about the debt because, legally, you don’t have to repay it.

Know Your Rights and Avoid Unnecessary Payments

Here is what you should take away from the statute of limitations discussion at the end of the day. If you are in debt to a collection agency or to a creditor and you signed a legal document promising to repay, and the nonpayment or delinquency of that agreement has shown up on your credit report, it does not mean you still have a legal obligation to repay that debt. If the statute of limitations has expired, repaying the debt will actually hurt you in terms of your vulnerability to lawsuits.

Creditors cannot garnish wages, freeze bank accounts, or successfully file a lawsuit for payment of a debt once the statute of limitations has expired. Even if the debt is still listed on your credit report, make sure you confirm the statute of limitations before agreeing to make any payment or admitting to owing the debt.