A:

Learn what a statute of limitations on debt actually limits; that is, what activity or action can no longer justify legal proceedings in court. In all cases, a statute of limitations on debt only refers to the ability of creditors to bring a debtor to court for violating the terms of the credit agreement; the statute does not limit the ability of the creditor to attempt to collect on the debt nor does it remove your obligation as a debtor to repay the balance of your account.

Be very careful what you say to creditors once the statute of limitations governing your debt has expired. Depending on your state and the type of debt, even acknowledging that you owe the debt may be grounds for reviving the time period for legal action against you. In fact, under some circumstances, you may end up unintentionally extending the statute of limitations on a not-yet-expired debt that you owe.

Not all debts have a statute of limitations. If you are uncertain about whether your debt has a time-barred collection horizon, check your state's website. Under the Fair Debt Collections Practices Act, or FDCPA, the creditor is legally required to inform you of any statute of limitations.

Another tricky function of statutes of limitations is that they do not all start when the debt is first owed. Some statutes may start their "clock" as soon as the first payment is made, while some debts restart after every payment, and others do not start until a payment is missed.

If you are contacted about a debt that is past the statute of limitations, check your credit report. You should be able to see if the debt is being represented accurately and, if not, this could constitute a violation of the Fair Credit Reporting Act (FCRA) on the part of your creditor. It is not always legal for debts past their statute to be reported.

The only ways to remove your credit balance is to either repay in full, arrange with the creditor to have the debt cancelled, enter into a debt settlement program or have the debt discharged in bankruptcy. Once the statute of limitations expires, however, the creditor cannot use the power of the U.S. court system to make you pay. Your rights under the FDCPA are still in good standing, meaning you have legal recourse should your creditor use abusive or deceptive collection practices.

It is illegal for a creditor to try to force repayment by suggesting it can take legal action against you if the statute of limitations governing the debt has expired. However, not paying a debt likely has a negative effect on your credit score, regardless of any statute of limitations.

RELATED FAQS
  1. Debt and collection agency

    Find out what happens when your debt account is sold from one collection agency to another and the impact on your balance ... Read Answer >>
  2. What's the difference between debt consolidation and debt settlement?

    Learn the differences between negotiating a debt settlement with your existing creditors and applying for a new consolidation ... Read Answer >>
  3. How long does it take for items to show up on my credit report?

    Find out how long missed payments, collections and requests for credit take to appear on a credit report and how often creditors ... Read Answer >>
  4. How will debt settlement affect my credit score?

    Understand how debt settlement typically works and find out how sometimes the best option to eliminate an outstanding debt, ... Read Answer >>
Related Articles
  1. Personal Finance

    7 Tips For The Do-It-Yourself Debt Manager

    Hired gun not in your budget? Learn to be your own credit counselor.
  2. Personal Finance

    Will Paying Off Old Debt Boost Your Credit Score?

    Learn why paying down your debts may not always be the fast-track to improving your credit score.
  3. Personal Finance

    Fighting Back Against Collection Lawsuits

    There are still options available to those being pursued by a creditor.
  4. Personal Finance

    Debt Settlement Arrangements And Your Credit Score

    The debt settlement process is not for everyone and can further damage your credit score. However, it can prevent the debt from being sold to a collection agency, who may only accept payment ...
  5. Personal Finance

    Debt Settlement: Cheapest Way to Get Out of Debt?

    Debt settlement is not for everyone, but for those seriously in debt it may prove an effective means of solving the problem.
  6. Personal Finance

    Negotiating A Debt Settlement

    If you're being harassed by a debt-collection agency, you can take charge. Find out how.
  7. Personal Finance

    How To Manage And Consolidate Your Own Debt

    With debt management services costing a lot of money, this article looks at why it is better to manage your own financial liability.
  8. Insights

    How Debt Limits A Country's Options

    While debt is fundamentally necessary to the operation of a national government, it can also be limiting and dangerous.
  9. Financial Advisor

    The 4 Best Debt Reduction Services

    It can be tricky to find the best debt reduction services for your financial situation. These top 4 debt consolidation firms help make the process easier.
RELATED TERMS
  1. Zombie Debt

    Zombie debt is debt that has "risen from the grave" when debt ...
  2. Statute of Frauds

    A statute of fraud is a legal measure wherein certain types of ...
  3. Collection Agency

    A collection agency or debt collector is a company hired by lenders ...
  4. Re-Aging Debt

    The forced resumption of legal obligations on old debt is called ...
  5. Anti-Takeover Statute

    An anti-takeover statute is a state regulation that prevents ...
  6. Debt Assignment

    Debt assignment is a transfer of debt, and all the associated ...
Trading Center