Understanding the statutes of limitations on debt
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.” Specifically, consumers are sometimes under the belief that taking certain actions with old, delinquent debts can prolong the amount of time those debts stay on your credit report. Statutes of limitations can be complicated, especially as they relate to debt, so here’s what you need to know in order to make the best choices for your unique circumstances.
Impact on your credit report
For starters, a debt’s statute of limitations has no bearing on your credit report. When you get a negative mark on your credit history (by missing a payment, for example), that negative mark remains on your credit report for 7 years. (In the case of certain events, such as a Chapter 7 bankruptcy, some negative marks may be reported for up to 10 years.)
If that negative mark is legitimate (and not an error), then it will not go away until those 7 years have passed. These is no way to “reset the clock” on such negative marks. There is no action you can take that will make them disappear sooner, or stick around longer.
As time goes by, these old negative marks have less and less impact on your score. This means that while a five year old delinquency will still show up on your credit report, it won’t necessarily prevent you from having a good score.
The statute of limitations on a debt ultimately dictates whether or not a creditor can sue a debtor over an unpaid debt. Once the statute of limitations on a debt has run out, the creditor loses a good deal of leverage. It does not mean, however, that they won’t continue to attempt to collect the debt.
When does the clock start?
While every state has its own laws, per the Federal Trade Commission, the “clock” generally starts at the moment you miss a payment and your account becomes delinquent. If the statute of limitations is 3 years and you missed a payment due on May 1, 2013, then by the end of the day on May 1, 2016 that debt will likely be considered “time-barred.”
Technically, a debt collector or creditor cannot sue you for a time-barred debt. They can, however, continue to attempt to collect the debt. They will most likely continue normal collection practices until you send a cease and desist letter ordering them to discontinue contacting you.
It’s also important to keep in mind that a creditor may still attempt to sue you over a time-barred debt. If this happens, it is your responsibility to respond to the summons and make your case in court. Don’t assume that because the statute of limitations has run out that you don’t need to take action. The court will very likely rule in favor of the creditor if you do not appear in court.
If you want to avoid having your wages garnished, go to court and present evidence that the debt in question is time-barred and beyond the statute of limitations.
Reviving the debt
Unlike negative marks on your credit report, the countdown on the statute of limitations can be reset or “revived” if you take certain actions. If you make a payment on an old, delinquent debt, the statute of limitations is reset. In fact, if you simply admit that the debt is yours while speaking to a collection agent over the phone, the statute of limitations may be reset.
The best course of action is usually to avoid claiming a debt unless you plan to pay it off in full. If you’re contacted about an old debt, ask for verification, as well as the date of the last payment.
Statute of limitations on debt for all states
So when will the statute of limitations on your debt run out? Well, laws differ from state-to-state. It also depends, in part, on the nature of the agreement under which the debt was accrued. That means that in any one state the statute of limitations for a debt may be different if the agreement is written (a personal loan), open-ended (a credit card), oral (spoken, but not captured in writing), or a promissory note.
Here are the lengths of the current statutes of limitations for debt in all 50 states. Please keep in mind, laws change and when it comes to legal matters, your best bet is always to speak with a qualified attorney.
|New Hampshire||3 years||3||6||3|
|New Jersey||6 years||6||6||6|
|New Mexico||6 years||4||6||4|
|New York||6 years||6||6||6|
|North Carolina||3 years||3||5||3|
|North Dakota||6 years||6||6||6|
|Rhode Island||10 years||10||10||10|
|South Carolina||3 years||3||3||3|
|South Dakota||6 years||6||6||3|
|West Virginia||10 years||5||6||5|
As you may have noticed, the statute of limitations is almost never 7 years. This means there may be circumstances where a debt is time-barred but still on your credit report. Conversely, a creditor may still be able to sue you for a debt that’s aged off your credit report. This is why it’s important to understand the laws of your state so you can make informed decisions.
Article updated November 2018