How Long Can a Creditor or Debt Collector Legally Pursue a Debt?


How Long Can a Creditor or Debt Collector Legally Pursue a Debt?

Well, that depends on what state you live in. And truth be told a creditor or debt collector can try to collect from you until the day you die. The bottom line is, they want their money and they do have a legal right to sue you for that money should they choose to do so.However,each state has a statute of limitations which limits the amount of time a creditor or debt collector can sue you

What Is the Statue of Limitations?

The“statute of limitations(SOL)is a law which determines how long a creditor or collector canlegallyforce you to pay the debt, meaning they can sue you in a court of law for the debt you owe them. The statues can vary quite a bit from state to state,for instance in Colorado the (SOL) is 3 years but in Rhode Island the (SOL) is 10 years, yikes! Most state statutes range between 3-6 years. I want to be very clear that this article is referring to the statutes of credit card debt only. Each state has its own (SOL) regarding other types of debts such as oral contracts, open ended contracts, promissory notes, public records etc.

Ifa creditor or debt collectortakes you to court and wins their case against you, but you are unable to pay them the amount owed,then a judgment will be rendered against you in which case you risk wage garnishment or a lien against your property (both real and/or personal)or a levy of your bank account

When Exactly Does the Statute of Limitations Begin?

It is important to know exactly when the clock starts ticking with regards to (SOL) and the reason it is important is so you’ll know when a creditor or collector can no longer sue you. The (SOL) clock starts ticking on date of last activity (DLA)and often times this is the date that you made your last payment, but it can also be the date you last used your card, entered a payment agreement, made a promise to pay or even acknowledged liability for the debt. All of this is considered “activity” So for example, if the last activity on your account was the last day you made a payment, then the (SOL) clock starts ticking that day and continues to tick away as long as no other activity occurs on your account. So, if you are in a state with a 3 year (SOL) then legally a creditor or collector can no longer sue you after you have hit the 3 year mark from the (DLA) Once your debt is past (SOL) then it is considered “Time Barred” As mentioned above a creditor or collector may still attempt to collect money from you after (SOL) but they cannot sue you and force you to pay. That said, we have seen a few cases where a client has been sued after (SOL) but in each case we have guided them through the court processby using the expired (SOL) as a defense and they have won their case everytime.

Can the Statute of Limitations Clock Be Reset? YES,It Can!!!!

THIS…. Is super important to understand. The (SOL) time clock can be reset a number of different ways meaning the timeframe in which a creditor or debt collectorcan legally use the courts to force you to pay the debt will start completely over therefore allowing them the option to sue you for the full amount plus any additional interest and fees that may have accrued. So below I have listedseveral ways this can happen as well as the consequences you will faceshould this happen to you.

What Actions Can Restart the Statute of Limitations Clock?

There are several actions that you may not be aware of that can restart the (SOL) clock ticking again and I have listed them below. FYI, proceed with caution when you’re communicating with a debt collector about your debt. They often-times use less than scrupulous tactics so they may try to get you to say or do something that would restart the (SOL) Below are the most common actions that can resuscitate an inactive accounteven if it’s done accidently. You will not receive a notification that the statute has restarted, but creditors, who keep notes on your account, may know that you have done something to restart the clock on your debt.

  • Making a payment for any amount
  • Entering a payment plan
  • Accepting a settlement offer
  • Agreeing to pay off some of the debt
  • Acknowledging that you owe a debt
  • Making a new charge on the same account.

Consequences of Restarting the (SOL) Clock

Let me give you an example of the consequences you’ll face should you purposely or unknowingly take any of the actions above that can reset the clock. Let’s say you live in a state with a 3 year (SOL) and you haven’t made a single payment or had any activity on that account for 2 years and 11 months. This would mean that in only one more month that account would reach its statute of limitations therefore eliminating your risk of being sued. But if you voluntarily or inadvertently take any of the above actions this means your (SOL) starts completely over therefore allowing the creditor or debt collector a full 3 years from the date you took above action(s) to legally force you in a court of law to pay that debt if they choose to so do. So in other words you just bought yourself 3 more years to potentially be sued.

Statute of Limitations and Reporting Debt on Your Credit Reports

Ok, I want to be very clear about something here, the (SOL) for collecting on credit card debt has nothing to do with the amount of time a derogatory account can report on your credit files. Credit reporting has its own statute of limitations which I am not going to get into right now and perhaps that’s fodder for another blog post. But the reality is, just because you are past your (SOL) for collecting on a debt this does not mean the debt must be deleted from your credit report. In fact, the law states that derogatory debt will remain on your credit files for 7 years from the date of first delinquency. Unless of course you are well versed in consumer laws, credit laws on both a state and federal level, understand the legal loopholes and know how to leverage your rightsto legally get it deleted prior to its 7 years.