Have you ever received calls from a debt collector on a very old debt?  Does it seem like you have debts that are transferred or sold to a new collection company on a regular basis?  At some point this madness has to stop, right?

Debts come with an expiration date known as the Statute of Limitations that prevents original creditors and debt collectors from pursuing these debts indefinitely.  These Statute of Limitations vary from state to state.  If the debt in question is beyond the Statute of Limitations in your state, you may not have a legal responsibility to pay.

Understanding the Difference Between Credit Reporting Time Limits and Statute of Limitations

There is a considerable amount of confusion on the part of consumers about Statute of Limitations and the Credit Reporting Time Limit as defined by the FCRA.  Both do come with time limits; however, they have different time frames and different effects.

The Credit Reporting Time Limit is the maximum amount of time that credit reporting agencies can report delinquent debts on your credit file.   Most delinquent accounts can report on a consumer’s file for a maximum of seven years.  There are some exceptions, though:  bankruptcies can remain on a credit file for up to 10 years (Chapter 7 remains on your report for 10 years from date of filing and Chapter 13 remains for 7 years from date of discharge), and tax liens can be reported up to 15 years.

The Statute of Limitations for collecting a debt is the period of time that a creditor or collector can use the court to force you to pay for a debt.  The time period starts on the account’s last date of activity and varies by state.

Using the Statute of Limitations to Your Advantage

To determine whether or not a particular account is outside the Statute of Limitations, you will need to know two things:  1) As stated above, you will need to know the Statute of Limitations that applies to your state; and  2)  Because the Statute of Limitations begins on the Date of Last Activity (DLA), you will need to know the date the account was last active.  To determine this date, you can pull a credit report.  Be aware that most consumer reports do not show the Date of Last Activity; however, you can purchase a consumer report from Equidata that will give you this information from all three credit reporting agencies, Experian, Equifax and TransUnion.  The cost is $24.95 for your report from Equidata.

Keep in mind that if the Statute of Limitations on a debt has expired, debt collectors may still attempt to collect the debt.  They are counting on the fact that most consumers know little or nothing about the Statute of Limitations and hoping that, if threatened enough, you will pay the debt off.  They may even sue you to get a judgment.  If you’re positive that the Statue of Limitations on the debt has expired, you may use this as a defense if the case does go to court.  If you’re unsure, we recommend that you contact a qualified attorney that specializes in this field.

NOTE:  The Date of Last Activity can be updated, restarting the Statute of Limitations.  If you take some sort of action on the debt, you are most likely updating the Date of Last Activity.  If you make or promise to make a payment, if you enter into an agreement to pay or if you charge anything to the account, you may actually be restarting the Statute of Limitations by updating the Date of Last Activity.

What’s The Statute Of Limitations in My State?

The Statue of Limitations on debt varies from state to state.  You can find your state’s Statute of Limitations here:  Statute of Limitations by State.

If you have moved from a state with a higher Statute of Limitations, be aware that a debt collector may try to use the Statute of Limitations for the state from which you moved.  This would give the collector more time to attempt to collect your debt.

What the Statute Of Limitations Does Not Do

Keep in mind when the Statute of Limitations expires, it only prevents a collector from winning a judgment against you when you can prove the Statute of Limitations has indeed expired.  The Statute of Limitations cannot:

• Keep a collector from filing a lawsuit against you.  The Statute of Limitations can keep them from winning the court case if you can legitimately provide proof.
• Wipe out the account.  You still owe the debt.  Even though an account may have an expired Statute of Limitations, the creditor may ask you to pay the debt before extending credit to you again.
• Prevent the debt from being reported on your credit report. The debt can be reported as long as the Credit Reporting Time limit allows, as defined in the FCRA.

We hope this information helps.  If you have any questions at all relating to Statutes of Limitations or credit in general, please call or email me!

Thanks,

Brad Boruk
The Credit Guy
214 504-7101