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What is the Statute of Limitations for My Debt?

On Behalf of | Oct 14, 2015 | Consumer Protection

What are the statute of limitations in my state?  That is a question we hear every day from consumers who are facing a lawsuit or garnishment.  But its usually the wrong question.  Most consumers have the misconception that a statute of limitations is a limit of time that a collector or creditor can pursue collecting a debt.  That is entirely untrue.  So what is the “statute of limitations” and when should we be asking that question?

A statute of limitations is a limit of time that one has to sue another for a wrong.  No matter what the lawsuit is about, there is a limit of time that the plaintiff has to file that lawsuit.  For instance, in many states, a claim for personal injuries has a two year statute of limitations.  Thus, should one get hurt in an accident, they would have two years from the date of that accident to get a lawsuit filed with the court.  If that lawsuit is filed within two years, the statute of limitations has been complied with.  If the lawsuit is late, it gets thrown out.

Similarly, when it comes to debt, there is a limit of time that the creditor has to file a lawsuit against the consumer.  Most of these claims are considered breach of contract cases.  Every state has a different statute of limitations for how long a creditor has to file a lawsuit against the consumer for breaching the contract to pay on the account.  When an agreement or contract to pay on an account is considered “breached” can be a topic of a whole other article.  However, to simplify it, when one is deemed to have breached an agreement can be from when the first payment is missed or it can be when the creditor “charged off” the account.  Either way, the important thing is that the collector or creditor has to file its lawsuit within the statute of limitations time for it to be able to move forward.

Once that lawsuit is filed and on time, then the whole idea of the statute of limitations as a defense is out the window.  This is where most misconceptions come in.   A collector does not have to finish the lawsuit within a certain period of time.  Also, if a judgment is entered against the consumer, that judgment has a whole new time limit of its own.  This time limit is NOT referred to as a statute of limitations.  Rather, it is simply how long a judgment lasts.  In many states, judgments last for up to 10 years and then by simple request to the court, can have 10 more years added on.  That’s right, a judgment can last for up to 20 years in many states.  This is where there tends to be a lot of confusion with consumers.

Many people believe that since they have not paid anything or heard anything on a judgment that occurred several or even a dozen years ago, that the statute of limitations must have expired.  We have to explain that it had not.  If the creditor filed the lawsuit in the first place within the time alloted by law, then the statute of limitations has been complied with, and we have the new issue of how much longer the judgment will last.  And unfortunately, that’s a long time.

Another part of the confusion is that many consumers will look to their credit reports and not see the judgment or the account, and assume that this means it is no longer a viable debt.  This again is untrue.  Credit reports are not legal statements of what one owes.  Credit reporting is nothing more than a history book of sorts that explains your credit history for the past 10 years or so.  It does not dictate what you owe or don’t owe.  Credit bureaus are for profit companies that gather and sell this information to potential credit granters, they do not decide what you owe.  What is owed is a matter determined by the law or by the courts.  The reason why consumers may not see these old items on a credit report is because a judgment only can be on a credit report for 10 years, and a negative accountwith a creditor can only be on for 7 years.  Thus, while a person may not see any evidence of a debt on a consumer report, that does not mean that there is not a valid debt out there.

Finally, to tackle one more misconception, there is no real limit on how long one can collect a debt.  There is no law that says a collector must stop trying to collect a debt after a certain time.  While the collector may be limited on what it can do to collect (as mentioned above there are limits of time to sue or to credit report) it may perpetually try to collect.  However, a collector cannot threaten to take actions it cannot take.  It cannot threaten to report a debt too old to report, and it cannot threaten to sue on a debt that is time-barred.

So when should we be asking about the statute of limitations?  When you are first served with the summons and lawsuit, you should try to determine when the last payment was made on that account, and ask then, is this lawsuit on time?

If you are being sued, have a judgment, or a collector chasing you down, contact us at SmithMarco, PC for a free consultation.