Debt collectors have only a limited window during which they can sue to collect. However, each state has a different period of collection, and moreover, certain circumstances can reset the clock and start the period afresh. Most states have debt collection periods of 3-6 years after the first missed payment, though some have statutes of limitation as long as 10 years. After that time, the unpaid debt is considered “time-barred,” meaning that a debt collector can’t sue for it. No matter where the debt collector is based, he’s bound by your state’s statute of limitations.
State-by-state statutes of limitation for credit card debt
|Washington, D.C.||3 years||Source|
|Georgia||4 or 6 years||State law specifies 4-year period, but GA courts ruled in Hill v. American Express that debt can be collected for 6|
|Kentucky||5 or 15 years||No court decision on whether 5-year oral or 15-year written limitation applies|
|New Hampshire||3 years||Source|
|New Jersey||6 years||Source|
|New Mexico||4 years||Source|
|New York||6 years||Source|
|North Carolina||3 years||Source|
|North Dakota||6 years||Source|
|Rhode Island||10 years||Source|
|South Carolina||3 years||Source|
|South Dakota||6 years||Source|
|West Virginia||10 years||Source|
Types of agreements subject to statute of limitations
Most states have different SOLs depending on the type of contract. For example, some differentiate between written and oral agreements; others separate open-ended accounts such as credit cards. Here are some typical contractual breakdowns:
- Oral contract: An agreement made with spoken words that is either unwritten or only partially written. It is just as valid as written contracts, though harder to prove.
- Written contract: As the name implies, a contract where the terms are fully put down and writing, and typically signed.
- Promissory note: A signed and written agreement to pay a certain amount of money on demand at a specified time.
- Open account: An account, such as a credit card, where the outstanding balance is not predetermined. Note that this is different from a promissory note because the repayment amount is not defined at the time of opening.
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What happens after the statute of limitations expires?
After the statute of limitations expires, a debt collector cannot sue you for repayment of debt. However, they can continue to contact you about repayment. You can ask your debt collector if your debt is time-barred. The law requires that he answer truthfully, but he may decline to answer altogether. In that case, you should ask what his records show as the last date of payment — this serves to identify the date the clock starts ticking. If the collector refuses to give this information, send him a letter telling him you’re disputing the debt and wish to verify it. This will stop collection procedures until you get verification.
You can decide if you will pay a time-barred debt, but each potential course of action has its benefits and drawbacks. The FTC recommends consulting an advisor before making any decisions.
- Do not pay any of the debt: Even though a collector can’t sue you to recoup the debt, they can continue contacting you unless you send them a letter telling them to stop. Refusing to pay your debts will also tank your credit score.
- Make a partial payment: Paying off only some of the debt is a risky proposition, because in some states, if you pay any amount, the debt is revived and is no longer time-barred. This resets the statute of limitations clock, and debt collectors can sue you to collect the full amount plus any interest and fees that accrued during the SOL period.
- Pay it off in full: Paying off the debt, even though you don’t have to, might help your credit score. Some collectors may be willing to accept a smaller amount than what’s owed, either in a lump sum or installments. However, make sure that you have a written and signed agreement with the creditor that paying this amount will settle your full debt before you begin repaying. Doing so will prevent the issues associated with a partial payment.