The following is provided for informational purposes only and is not intended as legal advice or credit repair.
When it comes to old, unpaid debts, there’s a bit of confusion around the term “statute of limitations. In particular, customers occasionally mistakenly think that doing specific things with old, past-due debts will extend the period of time those debts remain on your credit report.
Statutes of limitations can be difficult to understand, particularly when it comes to debt. Here is the information you need to make the best decisions for your particular situation.
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Statute of limitations is only about legal responsibility
Whether or not a creditor can sue a debtor for an unpaid debt ultimately depends on the statute of limitations on that debt. When a debt’s statute of limitations expires, the creditor’s negotiating position is significantly diminished. It does not mean, however, that they won’t continue to attempt to collect the debt.
You should think of the debts statute of limitations primarily as a potential defense. Knowing that the time frame specified by your state’s statutes has passed provides you with a strong defense that you are no longer obligated to pay the outstanding debt.
Are there different statutes of limitations for different debt types?
There may be distinct laws governing each type of debt in your state because different debts correspond to different kinds of contracts. The statute of limitations on credit card debt may, at the very least, be shorter than the statute of limitations on a personal loan or even a handshake agreement where no formal documentation has been made.
For the purposes of setting their statutes of limitations, debts are broken into four categories:
- Written | Most loans fall into this category. This includes most written agreements with fixed debt amounts and specified payback terms. This includes debt from auto loans, personal loans, mortgages, and medical bills.
- Open-ended | Generally speaking, this category includes all revolving credit types. This applies to credit cards and other types of open credit lines that allow you to borrow money, pay it back, and do so up to a predetermined amount.
- Oral | Non-written agreements also have a statute of limitations. This covers verbal contracts and handshake agreements between parties.
- Promissory notes: A promissory note is a type of written contract, usually between two people or between a person and a non-banking organization.
Revealed: What You Need to Know About Statute-Barred Debts!
FAQ
Can a debt be statute barred?
How long before a debt becomes uncollectible?
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State
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Written
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Oral
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Alaska
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6 years
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6
|
|
Arizona
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5 years
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3
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|
Arkansas
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6 years
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3
|
|
California
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4 years
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2
|
How do you prove a debt is time barred?
Can a 10 year old debt still be collected?
What happens if a debt is barred under statute?
If a debt is barred under statute, it means that by law (the Limitation Act), the lender has run out of time to use certain types of action to try and make you pay the debt. Statute-barred does not mean the debt no longer exists. In some circumstances, the creditor or a debt collection agency can still try to recover money from you.
How long does a debt take to become statute barred?
Debts, such as mortgage shortfalls, have a longer limitation period. Lenders have an extended limitation period of twelve years. That means it would take more than a decade from the default notice date for the debt to become statute barred. A secured debt is a type of debt that is backed by collateral.
How long is a debt statute barred in Scotland?
The limitation period is six years for most types of debt . This includes: Debts not included: In Scotland: The prescription period is five years for most types of debt in Scotland. This applies to most common debt types, including: Debts not included: How do I know when my debt is statute barred? Check which of these happened most recently :
What is the Statute of limitations on debt?
The statute of limitations on debt is a rule limiting how long a creditor can sue you for payment on a debt. All consumer debts, from credit card balances to medical bills, have limits on the number of years creditors have a legal right to sue you for payment.