Still Dealing with Old Debt? Know your Rights

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Generally, a creditor gives up the right to file suit and collect outstanding debt after a period of 6 years from the time the debt first became delinquent. However, many states have adopted their own limitations which can range anywhere from 2 to 15 years.

Every state has laws governing the time limitations in which a person or entity can file suit to collect outstanding debt. Once a debt passes beyond the time limitations of your state, a debt collector no longer has the right to file charges on that particular debt. This law is widely known as Statutes of Limitations.

Generally, a creditor gives up the right to file suit after a period of 6 years from the time the debt first became delinquent. However, many states have adopted their own limitations which can range anywhere from 2 to 15 years.

Statutes of limitations are only limited to oral agreements, promissory notes, open accounts, written contracts, mortgages, loans, auto payments and foreign/domestic judgments. There are no statutes of limitations on federal student loans, income taxes, fines and in some states past due child support.

Which State Law Applies to me?

In general terms, if the creditor wants to file charges against a particular customer, the creditor must file charges on a judicial court where the customer resides. However, there are exceptions to this rule. For instance,

If you live in Florida and you travel to New Jersey and sign a contract (not revolving credit accounts) in that state, the creditor can seek a judgment in the state where the contract was signed. In such a case, you will be sued under New Jersey statute of limitations.

Child support orders are usually governed and enforced in that particular state. If you have a child support order from New York and you currently reside in Florida, you can be sued in New York State for any outstanding delinquencies.

For all credit related contracts such as, mortgages, car loans and etc, the creditor has the right to sue the customer in any state they prefer. Under such situations, creditors always choose the state with the longest statute of limitations or the state that grant the highest amount of award.

What is my State’s Statute of Limitations?

As we mentioned earlier, every state has its own statute of limitations and it applies to every case differently. It is important to keep in mind the creditor has the right to file suite against you even if the statute of limitations has expired. In such a situation, you can ask the residing judge to dismiss the case on the grounds that the statute of limitations has expired.

The attached table lists the number of years in which various types of debt can be collected in each state. The information below can be altered or changed by the states at any given time, so consult an attorney before taking any legal actions.

Debt and Credit Terms

Open Accounts - These are revolving lines of credit with varying credit limits and balances. For instance, credit cards, home equity lines of credit and overdraft credit accounts can be identified as open accounts.

Written Contracts - The customer agrees to pay the loan under the terms written in the loan document. This document has to be signed by both parties (debtor and creditor) in order to be legally effective.

Promissory Notes - The document signed by a borrower promising repayment of a loan. It shows the amount of monthly payments, interest rate, first payment date, last payment date, and the late charge and prepayment provisions. Mortgages, auto loans and student loans are prime examples of promissory notes.

Oral Contracts - An unwritten agreement between two or more parties. Oral contracts are just as binding as written contracts, providing that sufficient proof of the contract exists.

About CreditGUARD

CreditGUARD of America is a non-profit credit counseling agency that assists consumers through credit counseling and financial education. Please visit our web site at http://www.creditguard.org or call 1-800-867-0406 for a free consultation with a certified credit counselor.

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Nemal Perera
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