Time-Barred Debts: Statute of Limitations

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Last updated on August 27, 2022 Comments: 21

This guest article is written by John Ulzheimer. John is a recognized expert on credit reporting, credit scoring, identity theft, and is the Senior Columnist at Credit Card Insider. He is twice Fair Credit Reporting Act (FCRA) certified by the credit reporting industry’s trade association and has been an expert witness in over 100 cases involving credit issues.

When you take on a credit obligation, or liability, you normally sign an agreement or promissory note requiring pay back of the debt. What you’ve just done is incurred what’s referred to as “contract debt.” If you default on a contract debt, such as a credit card, the creditor can and likely will vigorously pursue you for payment.

In many cases the original creditor will eventually sell your debt to a third party debt buyer. The debt buyer now becomes your creditor and you no longer owe the money to the original creditor. At this point the new creditor can report the account to your credit reports and enlist the assistance of a collection agency to persuade you to make good on your promise to pay the debt.

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Collection agencies normally collect debts using a variety of tactics. The agency will definitely report the debt to your credit reports. The agency will call you and write to you demanding that you make a payment. And, in the worst-case scenario for the debtor, the collection agency can sue you to collect the debt.

If you’ve been contacted by a collection agency about an old unpaid debt, it’s important that you do your due diligence and verify that the debt is valid and whether or not the collector still has the right to collect – especially if the debt has passed the statute of limitations.

The statute of limitations (SOL) to collect a debt is the length of time a creditor or collector has to take legal action and file a lawsuit against you in order to collect. If the statute of limitations has expired, the creditor or collector has no legal recourse and no longer has the ability to sue you for payment. The debt essentially becomes what’s called “time-barred,” which means the court no longer has the right to force you to pay up.

The SOL on time-barred debt varies depending on individual state laws, the type of debt and the type of contract initially agreed upon for the debt. For example, if you default on a contractual debt in the state of California, the statute of limitations is four years — meaning you can’t be sued for collection after four years has passed.

Statute of limitations by state

It’s important note that the state you resided in when you incurred the debt could take precedence over your current residence if you’ve moved to a different state. In most cases, the statute of limitations in the state where the contract was initially executed will rule unless the contract specifically states otherwise.

For example, if you signed a written contract with a creditor in California and later moved to Kentucky, the statute of limitations would be based on California law unless otherwise stated. In this example, California law only allows you to be sued for four years, where Kentucky’s is quite bit longer at 15 years. Here’s a breakdown by state for the statute of limitations on written contract debts:

Statute of Limitations on Written Contract Debts

StateNumber of Years
AL, AK, AZ, AR, CO, CT, GA, HI, KS, ME, MA, MI, MN, NV, NJ, NM, NY, ND, OR, SD, TN, UT, VT, WA, WI>6
IL, IN, IA, LA, MO, WV, WY10
KY, OH15

SOL: Credit reporting vs. debt collection

Don’t assume that the just because the statute of limitations to sue for a collection has passed that the account won’t be reported in your credit reports. The statute of limitations for collecting an unpaid debt and how long a creditor can legally report that debt in your credit report are very different. The statute of limitations for reporting a collection is 7 years, regardless of the state you live in. As evidenced in the preceding list the statute of limitations for collecting a debt can vary widely — from as little as 3 years to as long as 15 years for states like Kentucky and Ohio.

Unpaid collections: To pay or not to pay

One of the most common questions I get about collections is whether or not it makes sense to pay the debt, especially in regards to time-barred debts that have passed the statute of limitations.

When it comes to unpaid debts, I’d argue that you should pay the debt, especially if the debt is legitimately yours and you owe it. Keep in mind that collections will remain in your credit reports for 7 years, regardless of whether or not the statute of limitations has expired and the creditor or collector is legally able to sue you.

It’s also important to keep in mind that some lenders may require that you pay or settle old unpaid collections before they’ll agree to do business with you. This is especially common in the mortgage industry and something to keep in mind if you’re planning to apply for a mortgage to purchase a home.

Do collectors really sue if I don’t pay?

The collection industry is a big business and the odds of being sued for an unpaid debt is pretty high, so the answer is “yes.”

Obviously, the more you owe, the higher the risk of being sued. If you have a collection and are able to pay or settle the debt for less, it’s in your best interest to do so. It’s no secret that collection agencies are aggressive, and if the number of FDCPA and FCRA lawsuits are any indication, collectors are suing now more than ever to get their money.

Article comments

Jp says:

Can capital improvement assessments be considered time barred debt?

lsj robertson says:

what is the beginning date to calculate the 7 year limit on the debt being shown on credit reposts?

J Tennier says:

Been fighting for a HAMP modification in NV for over 7 years. WE had four NV mandated foreclosure mediation meetings and prevailed at all four. Then a District Court award for sanctions and legal fees was awarded to us along with a fifth mediation.
Fifth NV mandated “Foreclosure Mediation Program” hearing went against us, leading to a second Petition for Judicial Revue, this time going against us
This was followed by an appeal to the NV Appellate Court who found for us remanding the case back to the District Court with an evidentiary hearing to take place. This time we won,
1) No certificate to be issued;
2) Sanctions.
3) Reimbursement of reasonable legal fees.
Naturally the bank has not paid the sanctions and is ignoring the Court order to the best of my knowledge. My counselor is presently mia… (To return shortly, presumably???)
Interesting part of all this is the debt fell off my credit report the first of July, on the seventh anniversary of me stop paying the mortgage at the advice of a bank phone rep. who said at that time, it was “the only way the bank will start paying attention to you.” for HAMP modification.
My credit report score rose over 150 points.
I, on my own at this point, am wondering about “time barred debt.” This is something I’ve just been made aware of on my own as I said my counselor is mia at present.
Love to here accurate thoughts regarding this adventure…

Anonymous says:

What if the state you incurred the debt was in N.C., say at a medical specialisr in N.C., (3 year SofL), but you resided in a 6 year SofL state when you started treatments? What state could the creditor use as their SofL?

Anonymous says:

daughter in 2010. sorry.

Anonymous says:

It looks like my original post didn’t post: State of Missouri. My daughter in law and her mom hired a Lawn Care Service for their business. Not sure of that date. Mom died in 2009 and daughter died in 2010. Now that lawn service is trying to get my son to pay that debt. He was not involved in the business, I think he was working out of state then. Does he have to pay that debt??? Thanks,

Anonymous says:

I have signed a Promissory Note in Washington DC in May 2008. I was then, and still am, a resident of Maryland. I understand the Statute Of Limitation in DC is 3 years.

However, in exchanging emails with a heir (who lives in California) of the original creditor (who died in 2011), I stated in emails I’ve sent in 2011 and the latest in February 2014, that I would do my best to repay the debt.
So the question is: has my email RESET THE CLOCK for the SOL? If so, what can I do, since I still can’t repay the debt?

Thank you so much for your help!

Anonymous says:

I have a 2nd mortgage that is 72 months behind? I live in Colorado so this note should be Time Barred? Are there any Attorneys that work on this in Colorado so I can get this removed? or what can or should I do?

Anonymous says:

I have a diet from when I had a heart attack that I have been unable to pay as I remain unemployed. My statute of limitations ends in April, yet I received a call today that they are taking me to court. Suggestions?

Anonymous says:

can a collection company still run your credit on a time barred credit account?

Anonymous says:

What about civil demand letters, are those considered a credit obligation? Can they be handed over to a collections agency?

Anonymous says:

A demand letter is just that – a demand – that happens to be written up in scary legalese by a lawyer. However, a civil *judgment* (i.e. it went to court, and the court ordered you to pay) is quite another matter. If you receive a demand letter, read it very carefully to see whether it’s a demand reminding you of the debt and threatening to sue. A demand letter is the first step in the legal process leading up to a law suit – but if the statue of limitations has expired, it’s an empty threat. However, if you’ve already been sued and lost and had a judgment recorded against you, and the demand letter is reminding you of that fact, you have NO legal recourse left and must repay the debt.

Anonymous says:

Good article for those interested in investing in peer-to-peer lending. For the rest of us, the lesson is simple: never incur debt to begin with.

Anonymous says:

Steve is correct. Many collection agencies specialize in collecting time-barred debt. They can acquire the debt on the cheap (pennies on the dollar) because of the legal remedy expiration. Then they work to induce the debtor to do something that “re-sets” the clock on the statute of limitations back to zero. For example, in some states if the debtor makes a partial payment on a debt or otherwise acknowledges that he or she owes a debt that they haven’t been paying, the statute of limitations clock is re-set to zero. This is a bonanza for the collection agency: Now it can sue for collection.

Anonymous says:

I was under the impression that there are a few states where it is prohibited for a consumer to even by contacted by a collection agency regarding a time barred debt… yet it says nothing about that here. Do you know which states prohibit any contact regarding time barred debts?

Anonymous says:

For example, in some states if the debtor makes a partial payment on a debt or otherwise acknowledges that he or she owes a debt that they haven’t been paying, the statute of limitations clock is re-set to zero. This is a bonanza for the collection agency: Now it can sue for collection. – As this states in some states is California one of them?

Anonymous says:

This article is incomplete without information about “re-aging” debt.

Anonymous says:

Steve, that’s a very good point. Thanks for pointing that out. And you’re 100% correct that debts can be re-aged when debtors do something ill advised like make a payment on a debt that has already “expired.” That resets the clock. Some collectors will ask the consumer to make a “good will” payment for that very reason. The bottom line is if you want to pay your debt after it has become time barred, fine….but, you better settle or pay it in full or you might find yourself on the wrong side of a collection lawsuit.

A final note: making a payment does not reset the clock for credit reporting. NOTHING, repeat…NOTHING you do can cause the collection to remain on a credit report longer than the 7 years allowed by Federal law. Any attempts to cause a collection to remain longer is illegal and a violation of the FDCPA and FCRA.

Anonymous says:

That is incorrect if you make a partial payment on the balance it resets the clock of SOL. The SOL is calculated from last date of activity on the account. If you are beyond SOL making a payment or even acknowledging to the collector that the debt is valid can reset the statutes of the debit

Anonymous says:

I assume the chances of being sued for a debt depends on the amount of the debt. I doubt debt collectors will go to court over $50. Its not worth the time and effort for a smaller amount. But if you owe a larger amount then I expect its a lot more likely they’ll go to court for it.

I actually don’t personally know anyone who’s had a debt go to court. Course I can’t say thats something people would necessarily tell me. People don’t tend to be very open about it if they’re having debt problems. Everything will seem fine till you see the foreclosure sale sign go up in their lawn or their car towed off.

Anonymous says:

You’re correct Jim. The amount is going to drive the decision re: to sue or not to sue. It is VERY common for creditors and debt collectors to sue debtors for nonpayment.