What You Need to Know About the Statute of Limitations on Debts

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The calls and letters never seem to stop. Debt collectors are after the money you owe to your credit card provider, your dentist, or your doctor's office. It feels like this debt is always going to be a part of your life.

But there is a loophole here: Your debt comes with a statute of limitations — a sort of expiration date. After this date passes, debt collectors and creditors can no longer win a lawsuit to force you to pay up what you owe.

This statute of limitations won't prevent all of the misery that comes with owing money, but it's an important time frame to understand. Here's what you need to know.

Statute of limitations on debts

The statute of limitations is the time during which a debt is legally enforceable — meaning that if your credit card provider files a lawsuit against you, that entity still has a chance to force you to pay up. A court, for instance, might decide to garnish your paycheck to gradually pay back your creditors. (See also: Here's What to Do If Your Wages Are Garnished)

The statute of limitations on your debt depends on where you live. It also depends on the type of debt you have. Your statute of limitations might be different for open-ended debt, which includes credit card debt, and debt that comes in the form of a written contract, such as medical debt.

Usually, the statute of limitations on your debt will be three to six years. Though in states such as Rhode Island and Kentucky, it could be as long as 15 years depending on the type of debt. Check with your state to determine how long creditors have to sue you for unpaid debts.

It's important to note that the statute of limitations kicks in on the last date of activity on your delinquent account. Say you owe debt to a medical provider. The statute of limitations doesn't kick in when that debt becomes officially late. It kicks in after the last action you took on that account. If you're not careful, you could restart your debt's statute of limitations. Maybe you make a partial payment — that will restart the statute of limitations, no matter how much time had passed.

The statute of limitations will restart even if you agree to enter a repayment plan, so only take action on past-due accounts if you think doing so will help you pay off the debt or reach a resolution with your creditor.

Don't confuse statute of limitations with credit reporting limits

The statute of limitations is not the same as the credit reporting limit.

The credit reporting limit is the maximum number of years in which the three national credit bureaus (Experian, Equifax, and TransUnion) can list your delinquent accounts on your credit reports. That limit is seven years. After seven years, even if you haven't paid the debt you owe, any notices that you have delinquent accounts will fall off your report.

That's still an important limit to know: Delinquent accounts listed on your credit report can cause your credit score to drop by 100 points or more. However, the statute of limitations on your debt is a separate figure you need to look up. (See also: Here's What Happens to an Account in Collections — Even When You Pay Up)

Your debt doesn't disappear

It's important to realize that just because the statute of limitations has expired, it doesn't mean that your debt magically disappears. Debt collectors can continue to call you or write seeking repayment as long as they follow the regulations spelled out in the Fair Debt Collection Practices Act.

Your creditors can even file a lawsuit against you after the statute of limitations expires. They just won't win. They might hope, though, that you agree to pay up when facing the threat of a lawsuit, even if they know such a suit is doomed. (See also: What to Do When a Creditor Sues)

You need to be aware of the statute of limitations in your state. It's the best way to avoid paying up when you might have already decided it was in your best interests to not pay back what you owe.

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