Consumers often end up paying debts, which they do not need to pay anymore. As per statute of limitations (SOL) on debt, creditors cannot collect debt from consumers after a certain period of time. SOL on a debt, if expired, can protect you when the creditor sues you for non-payment of debt.
Credit reporting time limit and SOL
Many people confuse between credit reporting time limit and SOL. But the only thread that connects credit reporting time and SOL is debt. Credit reporting time essentially refers to the time period during which a delinquent debt stays on your credit report. SOL, on the other hand, is the time limit within which a debt collector can legally force you to pay back the money. After the SOL expires, you have the right of non-payment of debt. Unlike credit reporting time, SOL varies from state to state and starts from the date of last activity on the account.
SOL won’t stop collection activities
Even after the SOL has expired, debt collectors will continue with their collection work. You should understand that if the SOL expires, it won’t bring an end to collection activities. It would just mean that you can justify the non payment of debt by saying that the SOL has expired. Many people are not aware of SOL and pay according to the debt collector’s demand. In case, you move from one state to another, the debt collector may insist on following the SOL of your new state (if it is longer).
SOL-A few facts that you should know
- A debt collector can take you to court even when the SOL has expired. However, he cannot win the case.
- Even when the SOL has expired, you legitimately owe the debt.
- All delinquent accounts will be reported to the credit bureaus even if the SOL has expired.
Frequently asked questions on Statute of Limitations
1. When does Statute of Limitations start?
SOL starts either when you miss a payment for the first time or receive a demand letter from the creditor for not making payments.
2. Can creditors take legal action against me after the SOL has expired?
You still owe money to creditors even if the SOL has expired. They can contact you to collect the debt. It is even possible for creditors to sue you to get back their money. But you can defend yourself by proving that the SOL has expired.
3. Will an unpaid debt appear on my credit report after the SOL has expired?
Yes. Credit report has no relation with the SOL. You should understand that your creditor has the right to report an unpaid debt to the credit bureaus at any point of time. Therefore, it is quite natural for an expired debt to be present on your credit report.
4. Is Statute of Limitations applicable for all types of debts?
No. There are some debts which are independent of Statute of Limitations. The list includes income tax, student loans etc.
5. Can statute of limitations get restarted after it has expired?
Yes. The SOL can get restated if you take certain actions like:
- Admitting that you owe the debt.
- Making one or more payments towards the debt.
- Making a new payment agreement with the creditor.
If you make one of the above mentioned moves, the SOL clock will restart and your creditor will get another chance to sue you. However, you should know that just making a payment would not restart the SOL clock in many states. These states include Arizona, California, Florida, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New York, Texas, Virginia, West Virginia, and Wisconsin.
6. Which state’s SOL should I follow?
You should follow the SOL of the state where you live or the state where the loan was signed. If those two states are not same then the creditor can sue you where he prefers. This can be trouble because he will definitely choose a state with longer SOL. The time period of the SOL varies from state to state and also depends on the type of agreement. It is important for you to know the SOL for your state so that you do not make payments that can be avoided. Here is the statute of limitations on debt for the U.S states:
| State | Written Contracts? | Oral Agreements ? | Promissory Notes? | Open-ended Accounts? |
| Alabama | 6 | 6 | 6 | 3 |
| Alaska | 6 | 6 | 6 | 6 |
| Arizona | 6 | 3 | 5 | 3 |
| Arkansas | 5 | 3 | 6 | 3 |
| California | 4 | 2 | 4 | 4 |
| Colorado | 6 | 6 | 6 | 6 |
| Connecticut | 6 | 3 | 6 | 6 |
| Delaware | 3 | 3 | 6 | 3 |
| D.C. | 3 | 3 | 3 | 3 |
| Florida | 5 | 4 | 5 | 4 |
| Georgia | 6 | 4 | 6 | 4 |
| Hawaii | 6 | 6 | 6 | 6 |
| Idaho | 5 | 4 | 10 | 4 |
| Illinois | 10 | 5 | 6 | 5 |
| Indiana | 10 | 6 | 10 | 6 |
| Iowa | 10 | 5 | 5 | 5 |
| Kansas | 5 | 3 | 5 | 3 |
| Kentucky | 15 | 5 | 15 | 5 |
| Louisiana | 10 | 10 | 10 | 3 |
| Maine | 6 | 6 | 6 | 6 |
| Maryland | 3 | 3 | 6 | 3 |
| Massachusetts | 6 | 6 | 6 | 6 |
| Michigan | 6 | 6 | 6 | 6 |
| Minnesota | 6 | 6 | 6 | 6 |
| Mississippi | 3 | 3 | 3 | 3 |
| Missouri | 10 | 5 | 10 | 5 |
| Montana | 8 | 5 | 8 | 5 |
| Nebraska | 5 | 4 | 6 | 4 |
| Nevada | 6 | 4 | 3 | 4 |
| New Hampshire | 3 | 3 | 6 | 3 |
| New Jersey | 6 | 6 | 6 | 6 |
| New Mexico | 6 | 4 | 6 | 4 |
| New York | 6 | 6 | 6 | 6 |
| North Carolina | 3 | 3 | 5 | 3 |
| North Dakota | 6 | 6 | 6 | 6 |
| Ohio | 15 | 6 | 15 | ? |
| Oklahoma | 5 | 3 | 5 | 3 |
| Oregon | 6 | 6 | 6 | 6 |
| Pennsylvania | 6 | 4 | 4 | 6 |
| Rhode Island | 15 | 10 | 10 | 10 |
| South Carolina | 10 | 10 | 3 | 3 |
| South Dakota | 6 | 6 | 6 | 6 |
| Tennessee | 6 | 6 | 6 | 6 |
| Texas | 4 | 4 | 4 | 4 |
| Utah | 6 | 4 | 6 | 4 |
| Vermont | 6 | 6 | 5 | 6 |
| Virginia | 5 | 3 | 6 | 3 |
| Washington | 6 | 3 | 6 | 3 |
| West Virginia | 10 | 5 | 6 | 5 |
| Wisconsin | 6 | 6 | 10 | 6 |
| Wyoming | 10 | 8 | 10 | 8 |
You should thoroughly read and understand the agreement signed with your creditors to know what kind of actions will trigger off the SOL clock. If your creditor fails to sue you within the time permitted by the SOL in your state, you cannot be legally forced to pay back the debt.
