The statute of limitations of a debt is the time period in which a creditor or debt collector may sue a debtor in order to recover a debt. The length of this time period varies by state and by the type of agreement between the creditor and the debtor (i.e. oral vs. written contract). The clock on the statute of limitations starts ticking as of the date of delinquency.

Statute of Limitations vs. Reporting Period

After visiting a few credit and debt internet forums, I quickly realized that people are frequently confusing the statute of limitations with the reporting period for delinquencies. The reporting period refers to how long a debt can legally be listed on one’s credit report. The statute of limitations (SOL) has nothing to do with the reporting of a debt; it only determines how long a creditor or collector has to file suit against a debtor for an unpaid debt. These two timeframes are completely independent of each other. The reporting period within which a creditor or collector may continue to legally list a delinquent account on your credit report is generally 7 years, which is longer than the SOL in many states. So while you can’t be sued for a debt after its statute of limitations has expired, it can continue to haunt your credit reports until the reporting period has ended.

What If You’re Pursued For a Debt Whose SOL Has Expired?

As you may know, it is not uncommon for collection agencies and junk debt buyers to attempt to collect debts that are past the statute of limitations (these are also known as ‘time-barred debts’, by the way). I have found that another common misconception is that it’s a violation of the Fair Debt Collection Practices Act (FDCPA) for a creditor or collector to try to collect a debt that is no longer within SOL. However, that is not the case. The expiration of a debt’s SOL does not automatically make the debt invalid; it just means the debtor can no longer be sued for it. Creditors/debt collectors still have the right to attempt to collect a debt that is past the statute of limitations, but it is a violation of the FDCPA if they sue, or threaten to sue (remember, per the FDCPA collectors are prohibited from making threats that they will not or cannot legally follow through on).

So what should you do if a collector demands payment from you on a debt that is past the statute of limitations? Well, that depends on the answers to the following questions:

-Check your credit reports; is the debt being reported? If yes, and the debt is older than 7 years old, dispute the listing with the credit bureaus. Derogatory items (with the exception of bankruptcies and tax liens) should not appear on your reports after more than 7 years.

If the debt is more recent than 7 years old and it does appear on your credit reports, you can still dispute the debt with both the credit bureau and the creditor or collector that is reporting the debt. (If it’s a third-party collector, include a debt validation request along with the details of your dispute–just combine both requests in one letter.) If the creditor or collector can’t satisfy your request, they will be forced to delete the listing from your reports and cease collection activity. If the debt is properly validated or verified, you will need to pay it in order to get it deleted from your reports (in this case, try to negotiate a pay for delete agreement).

If the debt doesn’t currently appear on your reports, continue to check periodically because it may show up later (you should be monitoring your credit reports regularly anyway!).

-Assuming the debt is in fact valid, do you want or need to pay it? As mentioned above, sometimes a debt is past the statute of limitations, but still within the reporting period. In this case, it will remain on your credit reports until you pay it or until the reporting period ends. But regardless of whether the debt is listed on your reports or not, you may just feel that the right thing to do is to pay back what you owe. If so, I recommend contacting the original creditor to offer payment–personally I would never pay a bottom-feeding junk debt buyer. Remember, they usually purchase debts for just pennies on the dollar, so the full amount that you originally borrowed did not come out of their pocket! Plus, I feel most of them are law-flouting scumbuckets who don’t deserve to stay in business, so naturally I wouldn’t be interested in helping them increase their bottom line.

If you can’t or don’t want to pay it, you can’t legally be forced to do so, and in that case you can send a statute of limitations dispute letter.

If you’ve lived in more than one state, which state’s statute of limitations apply?

This depends on what type of debt it is. For revolving accounts (i.e. credit cards), the SOL of the state in which you currently live applies. But for debts incurred under a written contract (i.e. auto loans and mortgages), the creditor/collector may choose whether to file suit in the state where the contract was signed, or the state where you reside. Needless to say, they will probably pick the state with the longer SOL!

Last and most importantly!

If a creditor/collector tries to collect a debt from you that is past the statute of limitations, follow the instructions above; do not make a payment on the debt, and do not acknowledge that you owe the debt. Doing so can reset the clock on the SOL, thus leaving you open to a lawsuit! Also, avoid speaking to creditors and collectors on the phone. Keeping all correspondence strictly in writing helps to protect your rights and makes it impossible for sneaky debt collectors to lead you into saying things they can use against you.

I hope I’ve helped clear up some of the confusion regarding the statute of limitations on debts; if you have any questions please feel free to leave a comment!