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How does debt collection work?
When a payment is marked as delinquent, which happens about 30 days after the due date has passed and no payment has been made, the initial stages of the debt collection process usually start. At this point, consumers might start receiving calls or notices from the creditor, but if the creditor is unable to get in touch with you, debt collection efforts might intensify.
“The creditor may sell the debt to a collections agency later, typically 180 days after the original due date of the payment,” states Michael Micheletti, director of communications at Freedom Financial Network. This action shows that the creditor has given up trying to collect the debt on its own, and selling the debt to a collection agency can help them avoid losing as much money as possible. ”.
At this point, you’ll likely start to hear from the debt collector. Although the debt and the payment have not changed, the debt collector now has the authority to collect the payment.
According to Consolidated Credit’s April Lewis-Parks, director of corporate communications and education, “debt collectors are companies that collect unpaid debts for others.” Employing debt collectors is typically more economical for businesses than having employees and their own time spent following up on past-due accounts. ”.
Limitations on debt collection by state
A legal limit on the amount of time debt collectors can lawfully sue customers for unpaid debt is known as the statute of limitations. The debt statute of limitations can be as short as three years or as long as twenty years, depending on the state and type of debt.
To help you get started, here is a list of each state’s statute of limitations for various kinds of debt. However, keep in mind that credit card companies occasionally argue in court that the laws in their home state should apply, not yours.
In the table below:
- Even if the agreement is informal (just a few notes between neighbors written on paper), written contracts are the debts connected to that agreement.
- Debts for which verbal repayment promises were given but no formal contract was created are known as oral contracts.
- Promissory notes, a particular kind of contract, are used to secure debts. They specify the amount owed, when it must be paid, and how much interest will be charged. For mortgages, student loans, personal loans, and other official debt arrangements, promissory notes are frequently used.
- Revolving credit accounts, such as credit cards or credit lines, are examples of open-ended accounts. These accounts can be borrowed from, paid back, and then reopened.
It’s also important to note that case law and state regulations on statutes of limitation are always evolving and often have more nuance than can be displayed in a single table. For example, revisions made to Kentucky state law in 2014 changed the limitations period that applies to written contracts — including credit card applications — signed by the state’s consumers. In Vermont, the statute of limitations for debts secured by promissory notes is 14 years — unless the signing of the note was not witnessed, in which case the limitation is six years.
Because of this, it’s advisable to speak with a lawyer in your state to find out which statutes of limitations, if any, apply in your particular case.
Statutes of limitations by state |
||||
|---|---|---|---|---|
| State | Written contracts | Oral contracts | Promissory notes | Open-ended accounts |
| Alabama (source, source) | 6 | 6 | 6 | 3 |
| Alaska (source) | 3 | 3 | 3 | 3 |
| Arizona (source) | 6 | 3 | 6 | 6 |
| Arkansas (source, source) | 5 | 3 | 5 | 5 |
| California (source) | 4 | 2 | 4 | 4 |
| Colorado (source) | 6 | 6 | 6 | 6 |
| Connecticut (source) | 6 | 3 | 6 | 6 |
| Delaware (source) | 3 | 3 | 3 | 3 |
| D.C. (source) | 3 | 3 | 3 | 3 |
| Florida (source) | 5 | 4 | 5 | 5 |
| Georgia (source, source) | 6 | 4 | 6 | 6 |
| Hawaii (source) | 6 | 6 | 6 | 6 |
| Idaho (source) | 5 | 4 | 5 | 4 |
| Illinois (source, source) | 10 | 5 | 10 | 5 |
| Indiana (source, source) | 10 | 6 | 10 | 6 |
| Iowa (source, source) | 10 | 5 | 10 | 5 |
| Kansas (source, source) | 5 | 3 | 5 | 3 |
| Kentucky (source, source, source) | 10 | 5 | 15 | 10 |
| Louisiana (source, source) | 10 | 10 | 10 | 3 |
| Maine (source) | 6 | 6 | 20 | 6 |
| Maryland (source) | 3 | 3 | 6 | 3 |
| Massachusetts (source, source) | 6 | 6 | 6 | 6 |
| Michigan (source) | 6 | 6 | 6 | 6 |
| Minnesota (source) | 6 | 6 | 6 | 6 |
| Mississippi (source) | 3 | 3 | 3 | 3 |
| Missouri (source, source) | 10 | 5 | 10 | 5 |
| Montana (source) | 8 | 5 | 8 | 5 |
| Nebraska (source, source) | 5 | 4 | 5 | 4 |
| Nevada (source, source) | 6 | 4 | 3 | 4 |
| New Hampshire (source) | 3 | 3 | 6 | 3 |
| New Jersey (source, source) | 6 | 6 | 6 | 6 |
| New Mexico (source, source) | 6 | 4 | 6 | 4 |
| New York (source) | 6 | 6 | 6 | 6 |
| North Carolina (source, source) | 3 | 3 | 3 | 3 |
| North Dakota (source, source) | 6 | 6 | 6 | 6 |
| Ohio (source) | 6 | 6 | 6 | 6 |
| Oklahoma (source, source) | 5 | 3 | 6 | 3 |
| Oregon (source, source) | 6 | 6 | 6 | 6 |
| Pennsylvania (source) | 4 | 4 | 4 | 4 |
| Rhode Island (source, source) | 10 | 10 | 10 | 10 |
| South Carolina (source, source) | 3 | 3 | 3 | 3 |
| South Dakota (source, source) | 6 | 6 | 6 | 6 |
| Tennessee (source, source) | 6 | 6 | 6 | 6 |
| Texas (source, source) | 4 | 4 | 4 | 4 |
| Utah (source, source) | 6 | 4 | 6 | 4 |
| Vermont (source, source) | 6 | 6 | 6 | 6 |
| Virginia (source, source, source) | 5 | 3 | 6 | 3 |
| Washington (source, source) | 6 | 3 | 6 | 6 |
| West Virginia (source, source) | 10 | 5 | 6 | 5 |
| Wisconsin (source, source) | 6 | 6 | 10 | 6 |
| Wyoming (source) | 10 | 8 | 10 | 8 |
Do NOT Pay Collections Agencies | Debt Collectors EXPOSED
FAQ
Will a debt collector ever give up?
How long before a debt is uncollectible?
|
State
|
Written
|
Oral
|
|
California
|
4 years
|
2
|
|
Colorado
|
6 years
|
6
|
|
Connecticut
|
6 years
|
3
|
|
Delaware
|
3 years
|
3
|
What happens if you never pay collections?
Is it OK to ignore debt collectors?
Is a debt collector hounding you?
A debt collector is hounding you, seeking payment on a consumer debt you owe. Debt collection tactics can be annoying at best — and predatory, or even illegal, at worst.
What happens if a debt collector files a lawsuit?
If a debt collector files a lawsuit after the time limit has run out, this is a defense you can raise in the lawsuit. On rare occasions, the debt collector will stop collection efforts when the statute of limitations has run. Debt buyers may buy debt even though the statute of limitations has passed.
Can a debt collector make you pay more than you owe?
Debt collectors can’t make you pay more than you owe or threaten you with arrest, jail time, property liens or wage garnishment if you don’t pay. Wage garnishment might be legal in your state, but your debt collector will need to take you to court first. They must provide you with information about your debt.
What happens if a Debt Collector calls you?
It puts the onus on you to try to prove a negative: You: “Look, here’s my ID and my current phone bill.” Them: “You could have changed your name. Pay up.” The Fair Debt Collection Practices Act already requires collectors to stop calling or contacting you — unless it’s to notify you of an actual legal action — if you ask them to.