The statute of limitations in regard to debt collection is the time period a creditor has to file a lawsuit for a delinquent debt. It’s important to note that once the statute of limitations expires a consumer may still be slapped with a lawsuit. At the same time, once the statute of limitations runs its course, a consumer may have a lawsuit dismissed on this basis. But writing a letter to a collection agency regarding the statute of limitations likely won’t stop the collection process.
The statute of limitations is intended for lawsuits only, and subsequent attempts by debt collectors should be expected even after this time period passes. It is legal for the creditor and debt collection agencies to contact you at this point, although it should be mentioned that their efforts will be less intense, as the debts are “out of the statute” period, and thus deemed less valuable to debt collectors. A good rule of thumb is that the older the debt, the less likely it is to be collected.
In most cases a lawsuit won’t be pursued unless the amount of withstanding debt is rather large. If a creditor does file a lawsuit and it beyond the statute of limitations, the consumer must file a response with the court explaining the expiration of the statute of limitations and lawsuit should be dismissed. Please note that the statute of limitations varies by state and collection type. The appropriate state is determined by the place of residence when the delinquency originally occurred.
Many people have been confused by the supposed “resetting” of the statute of limitations if a collection or unpaid debt was paid. A great deal of people feel that if you make a payment it will reset the clock, and the statute of limitations would begin again from the time of the payment. This is not true. The statute of limitations starts from the date of the first delinquency, and will expire at a fixed time regardless of whether the account was paid down, paid off, or disputed.
Credit inquiries remain on a credit report for 2 years, late payments seven years from the month payment was due, collections seven years, charge-offs seven years plus 180 days from the date of delinquency, paid tax liens seven years from the date of payment.
Tax liens and federal student loans do not have a statute of limitations, and are due until ultimately paid off.
This is just a summary of a very complicated subject, but should clear up some misconceptions of what the statute of limitations does and does not cover. For the complete text, visit the following link:
