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Important Information to Know About the Statute of Limitations on Debts

Written by: Kristy Welsh

Last Updated: July 15, 2017

One of the most essential steps when cleaning up your credit, it to get out of debt. Carrying too much debt lowers your credit score and also makes you less attractive to lenders because they see you as someone who can not manage their finances. Chipping away at paying off your debts can be a slow process but if you stick to it, you will start to see the light at the end of the tunnel. But what about those debts that are really old? Should you be concerned with those? Should you pay those off as well? These are all very good questions and ones we see asked over and over again in our discussion forum.

Answers to these questions are not often clear-cut and there are a lot of factors which come into play when trying to decide on what you should do with those very old debts. Along with our article which has a state-by-state listing of the statute of limitations on different types of debts, this article goes hand-in-hand with that article in supplying more detailed information regarding the ins and outs of paying off old debts and what to do if you are being contacted by a debt collector. Read on!

How Long is SOL on Debts?

Unfortunately, there is no clear-cut answer to that question and to answer this question with a meaningful answer requires a bit more information. Such as, date of last payment, where you live, and the type of debt. As we mentioned earlier, we have put together a chart you can use as a guide to view each state's statute of limitations but we can't stress enough the need to check with your local state attorney general's office or a consumer attorney for more accurate information.

If SOL Has Expired, Can Debt Collector Try to Collect This Debt From You?

In some cases, yes they can, but again, there are a lot of variables that go into this answer. If you are being harassed by a debt collector regarding collection of an old debt, you can insist they stop contacting you. You must do this in writing but once they have received your letter they can only contact you to notify you of any legal action. In some states, it is illegal to try to collect on a time-barred debt and any creditor trying to do so is breaking the law. Again, our best advice is that if you have been contacted by a debt collector on a debt you feel has expired its SOL, contact a good consumer law attorney immediately for help.

What Happens When You Pay on an Old Debt?

If you pay anything, even a small amount, on an old debt, you may restart the clock on the statute of limitations. That is why it is very risky to pay on an old debt because you could be opening yourself up to collection efforts or even a lawsuit once you restart the clock. Your intentions may be in the right place, you feel bad you still owe this old and moldy debt and you want to clear your conscious, but you could be doing yourself more harm than good. Before you pay any money toward an old debt, make sure you check to see if this debt has expired and if so, just leave it well enough alone.

Can an Old Debt Appear on Your Credit Report After SOL Has Expired?

The length of time that negative information may be reported on your credit reports is governed by the Fair Credit Reporting Act (FCRA) and most negative information can be reported for up to seven years. The statute of limitations for most consumer debt is 4 to 6 years.  So you could have a situation where the statute of limitations expired on a debt in 4 years but the related collection account will still show up on your credit reports for another 3 years after that. As you know, collection accounts can do some serious damage to your credit score so even though the SOL may have expired, the related collection account may still linger on your credit causing more damage for up to 7 years.

If You Move, Which State's SOL Applies to Your Old Debt?

Now this is a tricky question to answer and one which requires a lot more information in order to come to a helpful answer. Consumers can generally be sued in the state where they took out the loan OR the state where they currently live. Sometimes the statute of limitations will be based on the laws of the state described in the contract (in the case of credit cards, that will be spelled out in the credit card agreement).

When it is not clear which state's SOL applies, it is often up the court to decide. In a number of court cases, the SOL that was shortest was the one that was applied. But this is not always the case so if you are being sued for a debt, contact a good consumer law attorney who can help you understand whether the SOL has expired or not and what your best course of action may be. 

Now we don't want to scare you off from paying down your debts, we just want to make you aware there are debts that you should pay, and there are debts you should not pay off. Before you even think about tackling any older debts, make sure you pull all of your credit reports so you can see exactly how the CRA's are reporting these debts. Go over each entry very carefully noting amount owed, date of last payment and/or activity, and if this debt has been turned over to a collection agency. If you have any question at all as to whether or not a particular debt's SOL has expired, talk to a consumer law attorney first before making any payments.