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Statute of Limitations on Debts - Collections, Debt Settlement, Debt Collection

Statute of Limitations on Debts

Last Updated: April 18, 2014

Below are the State Statutes of Limitations for various kinds of agreements. All figures are in years.

Oral Contract: You agree to pay money loaned to you by someone, but this contract or agreement is verbal (i.e., no written contract, "handshake agreement"). Remember a verbal contract is legal, if tougher to prove in court.

Written Contract: You agree to pay on a loan under the terms written in a document, which you and your debtor have signed.

Promissory Note: You agree to pay on a loan via a written contract, just like the written contract. The big difference between a promissory note and a regular written contract is that the scheduled payments and interest on the loan also is spelled out in the promissory note. A mortgage is an example of a promissory note.

Open-ended Accounts: These are revolving lines of credit with varying balances. The best example is a credit card account. Please note: a credit card is ALWAYS an open account. This is established under the Truth-in-Lending Act:

TITLE 15 > CHAPTER 41 > SUBCHAPTER I > Part A > § 1602
§ 1602. Definitions and rules of construction(i) The term "open end credit plan" means a plan under which the creditor reasonably contemplates repeated transactions, which prescribes the terms of such transactions, and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance. A credit plan which is an open end credit plan within the meaning of the preceding sentence is an open end credit plan even if credit information is verified from time to time.

Keep in mind, though, that the state statute of limitations on a credit card may come down to whether the agreement is in writing or not; whether it meets the required elements of a written contract. For instance, in Missouri if the creditor is able to produce a written credit card contract, then the 10 year statute applies. If the creditor cannot show the existence of a written contract, then the 5 year statute would apply - credit card or not. Here is case law in Missouri to illustrate this point:

In Capital One Bank v. Creed, 220 S.W.3d 874 (S.D. Mo.2000), the company alleged the parties entered into a contract, whereby the company would extend credit to the customer. The company alleged that the customer breached the terms of her contract by failing to pay the amounts for which credit was extended. The customer denied the allegations and asserted the affirmative defense that the action was barred by the statute of limitations. The appellate court ruled that the action was barred by the five year statute of limitations under Mo. Rev. Stat. § 516.120 (2000). The customer made a partial payment on December 2, 1999, and the company's petition was not filed until January 3, 2005. The ten year statute of limitations under Mo. Rev. Stat. § 516.110 was not applicable because the company did not produce a written promise by the customer to pay money.

Why should you care about the Statute of Limitations (SOL)

When does the Statute of Limitations start on a debt?

Here is more information on the Statute of Limitations on Judgments.

 

State

Oral

Written

Promissory

Open-ended Accounts

State Statute: Open Accounts

AL

6

6

6

3

§6.2.37

AR

5

5

5

3

§4-3-118

AK

6

6

3

3

§09.10.053

AZ

3

6

6

3

HB 2412

CA

2

4

4

4

§337

CO

6

6

6

3

§13-80-103.5

CT

3

6

6

6

Chapter 926 Sec. 52-576

DE

3

3

3

4

Title 10 Sec.8106

DC

3

3

3

3

§12-301

FL

4

5

5

4

§95.11

GA

4

6

6

4**

§9-3-25

HI

6

6

6

6

HRS 657-1(4)

IA

5

10

5

5

§614.1.5

ID

4

5

5

4

§5-216

IL

5

10

10

5 or 10***

735 ILCS 5/13-206

IN

6

10

10

6

§34-11-2-9

KS

3

5

5

3

§60-512

KY

5

15

15

5

§413.120 & 413.090

LA

10

10

10

3

§2-3494-4

ME

6

6

6

6

§14-205-752

MD

3

3

6

3

§5-101

MA

6

6

6

6

§260-2

MI

6

6

6

6

§600.5807.8

MN

6

6

6

6

§541.05

MO

5

10

10

5

§516.120

MS

3

3

3

3

§15-1-29

MT

3

8

8

5

22-2-207

NC

3

3

5

4

§1-52.1

ND

6

6

6

6

28-01-16

NE

4

5

5

4

§25-206

NH

3

3

6

3

382-A:3-118

NJ

6

6

6

6

2A:14-1

NM

4

6

6

4

§37-1-4

NV

4

6

3

4

NRS 11.190

NY

6

6

6

6

§2-213

OH

6

15

15

6

§2305.07

OK

3

5

5

3

§12-95A(1), (2)

OR

6

6

6

6

§12.08

PA

4

6

4

6

42 Pa. C.S.5525(a)

RI

10

10

6

4

§6A-2-725

SC

3

3

3

3

SEC 15-3-530

SD

6

6

6

6

15-2-13

TN

6

4

6

6

28-3-109

TX

4

4

4

4

§16.004

UT

4

6

6

4

78-12-25

VA

3

6

6

3

8.01-246

VT

6

6

5

4

§9A-3-118

WA

3

6

6

3

4.16.040

WI

6

6

10

6

893.43

WV

5

15

6

4

§55-2-6

WY

8

10

10

8

§1-3-105

** Georgia Court of Appeals came out with a decision on January 24, 2008 in Hill v. American Express that in Georgia the statute of limitations on a credit card is six years after the amount becomes due and payable

*** An Illinios appeals court ruled on May 20, 2009, that the statute of limitations on a credit card debt without a written contract was 5 years.

The material provided in this table for informational purposes only and should not be construed as legal advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors.

Why Should You Care About the Statute of Limitations?

Every day, consumers pay off collection accounts and charge-offs they do not have to pay off because the Statute of Limitations has already expired for the open account. Consumers pay off these accounts because the accounts still appear on their credit reports.

This information can be a powerful weapon in unburdening yourself of old debts, as creditors have a limited time in which to sue you. Remember: the Statute of Limitations begins to run from the day the debt - or payment on an open-ended account - was due. Also, this has nothing to do with how long an negative credit item can remain on your credit report. Here is an article on "How Long Negatives Stay on Your Credit Report".

Consumers also pay off these accounts when they are not on their credit reports. Even though an account was removed from their credit file, a collector watched their credit report for any activity (actually the computer was watching any credit activity). When the collector spotted the activity, he called the consumer for payment. All the consumer needed to say to the collector was, "I have an absolute defense--the Statute of Limitations has expired."

The Statute of Limitations does not cause your debt to go away after it expires. If the creditor files suit, the consumer has an absolute defense. The consumer must offer the new evidence to avoid a judgement. The evidence will consist of papers the consumer files to support his claim. If the creditor sues you, and you do not prove to the court that the Statute of Limitations expired, you will have a lost lawsuit and a judgment against you.

When Does the Statute of Limitations Start?

You might be asking yourself, "It has been such a long time since my account had any activity. When does my Statute of Limitations started ticking?"

There are various opinions on when the SOL starts:

  • The first time you fail to make a payment on your account.
  • The credit card company sends you a demand letter for the full amount.

Any can be true, depending on the credit card agreement and here is why.

The length of the statute varies from state to state and depends on the type of agreement, i.e. oral, written, etc. The one aspect of a statute of limitations that is pretty constant throughout all of US states' laws is when it begins to run.

A statute of limitations, or limitations of action statute, begins to run when a cause of action accrues. In plain English, that means the statute begins to run when you have done something contrary to the terms of your agreement for which you can be sued. Most of the time, that "something" is failure to pay your bill. When you don't make your payment on time, you have violated the terms of your agreement and you have given the creditor a cause of action.

Some credit agreements include an acceleration clause which must be invoked before a creditor has a cause of action. The acceleration clause could be activated by the creditor sending you a demand for payment in full by a certain date. In these instances, you must fail to pay the creditor after it has invoked the acceleration clause before the creditor has a cause of action, and the statute of limitations starts to run. You need to become familiar with the terms and conditions of your specific agreement to know for sure which event triggers a cause of action and thus, begins the running of the statute of limitations.

In any case, if the creditor fails to sue you in the time allowed by the applicable statute of limitations, you have an affirmative defense against the creditor's claim which can serve as a bar to recovery of the delinquent debt.

Calculating When the Statute of Limitations is Over

If you need to find out when the statute of limitations on a debt has expired, do the following:

  1. Take the date cause of action begins (date of last payment or demand letter):
  2. Add the number of years of the statute of limitations in your state.

For Example:
You last stopped paying on a credit card on Jan 15, 2001. The company sent you a demand letter for the full amount on July 15, 2001. The statute of limitations for credit cards (usually regarded as open accounts) in your state is 6 years.

The date at which you are "safe" from having a creditor sue you over this debt is:

No Acceleration clause: Jan 15, 2001 + 6 years = January 15, 2007
Acceleration clause: July 15, 2001 + 6 years = July 15, 2007.

Does a Partial Payment Restart the SOL?

Depending on what state you live in, if you make a partial payment, you could be postponing the Statute of Limitations' taking effect on your collection account or charge-off. A collector might call you one day and say you waived your rights when you made a deal with the collection agency. Do not take anything a collector tells you for granted. Make them prove it to you, in or out of court. For about half the population, the Statute of Limitations started ticking the day they made the last payment for their account.

Some states have laws which specify that a partial payment does not restart the clock on the SOL, unless there is a new written promise to pay. What that means is that you actually write out a new agreement with the orginal creditor and/or collection agency. If you live in one of these states, simply sending in a check doesn't restart the clock. The statute of limitations is only extended by new written promise to pay in these states:

Arizona, California, Florida, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New York, Texas, Virginia, West Virgina, Wisconsin.

Please review the exact state statutes and the fine print associated with them before relying on this website's info. Your situation may not apply.

What State Laws Should I Use When Figuring Out the Statute of Limitations?

According to Ron Opher, of ron4law.com:
In my opinion, the FDCPA applies, and so the only relevant jurisdictions are where the consumer signed the loan application and where the consumer currently lives (bank location is irrelevant). If those states are different, I believe the creditor has the choice of where to sue and can select the state with the longer SOL. There may also be an argument that the contract was signed "under seal" which might lead to a longer Statute of Limitations than an ordinary contract.

In Summary

Even though a debt is an absolute promise to pay, if the Statute of Limitations expiring is in force and the creditor tries to force you to pay the debt, you have the right not to fulfill the promise (debt).

You may also read the FTC's publication on Time Barred Debts.

 

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