Time Limit to Collect Debt
Unpaid debts can haunt you for years after the original creditors write them off as uncollectible. These debts travel from collection agency to collection agency, incurring fees along the way. Debt collectors may call you 10 or even 20 years from now, demanding that you pay off the long-forgotten account balance. Fortunately, state and federal laws protect you from being forced to pay particularly old outstanding debts.
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Statute of Limitations
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When a debt you owe falls delinquent for 180 days, your state's statute of limitations kicks in. Although each state's statute of limitations varies depending on the type of debt you owe, once the statute expires you have a valid court defense should the creditor ever attempt to sue you for the debt. An expired statute does prevent a creditor from being able to file a lawsuit against you. It only provides you with a defense. Should you fail to answer any debt collection lawsuit and present a defense, the creditor will win its suit by default.
Court Judgments
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A separate time limit creditors must abide by when collecting debts is the judgment validity period. A creditor that wins its court case against a debtor receives a court judgment. Judgments only remain valid for a limited period of time. It's up to the creditor --- not the court --- to successfully enforce the judgment before the time period for enforcement expires. While a judgment remains valid, creditors can seize your assets via various avenues. Wage garnishment and bank levies are two common examples of ways in which a judgment creditor can enforce its court judgment.
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Time Frame
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Statute of limitations vary considerably by state. In general, however, most states' statutes of limitations for debt collection fall somewhere in the three to six year range. Judgments often last much longer than statutes of limitation because of each creditor's ability to renew its court judgments for a subsequent enforcement term. State guidelines vary regarding how many terms a creditor can renew its judgment.
Misconceptions
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Consumers sometimes confuse the amount of time a creditor has to collect a debt with the amount of time the account remains on their credit report. According to the Fair Credit Reporting Act, most delinquent debts only tarnish your credit record for seven years. Should the creditor obtain a judgment, the judgment can remain for up to 10 years and sometimes longer. The reporting period for credit information is set by the federal government and has no effect on either the statute of limitations in your state or the judgment enforcement period.
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References
- MSN Money: Is There a Statute of Limitations on Debt; Liz Pulliam Weston; 2011
- Santa Clara University: Enforcement of Judgment; Gary Neustadler; 2009
- Sacramento County Public Law Library; Renewing a Judgment; Robyn M. Moltzen; April 2009
- Federal Trade Commission: The Fair Credit Reporting Act (Section 605/p.22,23)
