Debt collection and the statute of limitations

The statute of limitations is the total time period that a creditor has, with respect to debt collection, to file a lawsuit for a delinquent debt.

But it is also possible that once the statute of limitations expires, a consumer may still be slapped with a lawsuit.

past due photoA consumer may have a lawsuit dismissed, once the statute of limitations runs its course, on its basis. But it is most likely that the collection process won’t stop by writing a letter to the collection agency regarding the statute of limitations.

It is important to understand that the statute of limitations is intended for lawsuits only, and you should be prepared to expect successive attempts by debt collectors, even after this time period passes.

Older the debt, less likely it is to be collected
The creditor and the debt collection agencies can contact you, legally, at this point. Their efforts may be less intense, as the debts are out of the statute period, and thus less valuable to debt collectors. Most of the times, the older the debt, the less likely it is to be collected.

Lawsuits will be pursued for large debts only
Mostly, a lawsuit will be pursued only if the amount of debt is very large. In case a creditor does file a lawsuit, and it goes 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.

But do note that there are variations to the statute of limitations, according to different states and collection types. The appropriate state is determined by the place of residence when the delinquency originally occurred.

The supposed “resetting” of the statute of limitations, which happens when an unpaid debt is paid, confuses many people. Most of the people think that when you make a payment, it resets the clock, and the statute of limitations would then begin again from the time of the payment. This is not true.

Starting from the date of the first delinquency, the statute of limitations expires at a fixed time, regardless of whether the account was paid off or not. Tax liens and federal student loans do not have a statute of limitations, and are due until ultimately paid off.

This was just an overview about the statute of limitations, but it should help you to understand the basic concept and its effects.

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