As the Consumer Financial Protection Bureau explains on its site, “a statute of limitations is the limited period of time creditors or debt collectors have to file a lawsuit to recover a debt.” These periods vary according to state laws and your type of debt, the CFPB notes. If you’re sued for a debt and the debt is too old, you may have grounds for defense.
However, if you are being sued, we recommend speaking with an attorney who can offer their expertise, especially if you have reason to believe the statute of limitations, or SOL, has expired. “Even if the statute of limitations has expired, a court may still award a judgment against you if you don’t show up and raise the statute of limitations as your defense,” the CFPB warns. The onus is on the consumer to note that the statute of limitations has passed.
In this article, we’ll cover the basics you need to know about debt collections with regards to their statute of limitations by state.
What Is a Statute of Limitations on a Debt?
As we mentioned above, every state has a statute of limitations that limits how long a creditor or debt collector can successfully collect a debt. In California, for instance, the statute of limitations varies by the type of lawsuit.
A breach of a written contract is given four years from the date the contract was broken, while property damage allows three years from the date the damage occurred.
Typically, the statute of limitations starts when you miss your first payment with the original creditor. It does not start when the account was placed for collection. If a debt collector tried to sue you after this time period has expired, you could raise the SOL as a defense against the lawsuit.
Many consumers confuse the length of time that debts can appear on their credit reports with the debt collection statute of limitations. However, these are often two different time periods. If you have debts that have been charged off and/or are in collections, it’s critical that you get your credit reports to find out what is being reported. (You can view two of your credit scores for free on Credit.com.)
Not only will this give you helpful information about the dates you fell behind, but it may also alert you to collection accounts or even judgments you did not know existed.
Here are two things you can do:
- Get your free annual credit reports from AnnualCreditReport.com to see the specific information that is reported.
- Find out whether these items are affecting your credit by checking your credit scores.
Use the statute of limitations map provided below as a guideline and be sure to read the important tips below. Simply click on your state for more information.
Note: Credit card accounts are generally considered open accounts while installment accounts — like an auto loan — are often considered a written contract. But not always. See the important note below.
Understanding the State Statute of Limitations
This chart offers general guidelines for state statutes of limitations, but please keep in mind that it’s not always as straightforward as it seems. For example, the vast majority of state laws do not spell out the statute of limitations specifically for credit card debts. Sometimes those fall under written contracts, and other times they fall under open accounts. Or sometimes they can fall under either category, depending on the specifics of the situation.
If you have questions about the statute of limitations for your debt, we recommend you contact your state attorney general’s office, or even better, a consumer law attorney in your area. The latter is especially critical if you are being sued for payment.
What is the Credit Reporting Time Limit?
According to the Fair Credit Reporting Act (FCRA), the credit reporting time limit is the federal law that states how long negative items and information can stay on your credit report. Typically, this time limit is seven years. Delinquency information can be reported seven years from the first date of delinquency. However, charge-offs can be reported for seven years plus an additional 180 days from the initial date that the debt was reported to the credit bureau.
Student Loan Defaults
Many people have the immense burden of student loans on our shoulders and with them comes the many repayment and consolidation offers with lengthy terms. If you default on your student loan payments, then you may experience wage garnishment, or the government could withhold your federal tax returns.
The Statute of Limitations on student loan debt varies from state to state and can fall sometime between the timeframe of three years and sometimes as many as ten years.
Do I Have to do Anything?
When the time for credit reporting has expired, the negative items and outdated information will most likely drop from your credit file automatically. You do not have to contact any of the credit bureaus for this to be accomplished.
If you notice that there is an error, and something still seems wrong with your credit report, make sure you gather the evidence you need to prove the mistake and contact the credit bureaus to sort it out.
What About My Obligation to Pay?
A common misconception about the statute of limitations and debt is that once the time is up, you no longer owe the debt. However, this is not entirely true. The only thing that has lapsed is the reporting timeframe. It is still considered a legitimate debt that collectors can still seek payment on by calling or sending letters.
The statute of limitations, on the other hand, will limit the amount of time that the collector has to take legal action against you such as suing you for the debt that is owed.