The statute of limitations is just a legal term for the period that allows your creditors to take legal action against you for not paying your debts. Going beyond the time limit does not enable debtors to escape their loans, but it prevents lenders from filing a lawsuit or suing you for your past dues. How long is the debt statute of limitations? When does it begin and what happens to the time-barred debt? Below, Cutler & Associates provides answers to these common questions.
How long is the Statute of Limitations?
The rule on time limits will depend on various factors such as the state of your jurisdiction, whether there is a written agreement between you and your creditors, and the type of debt. As the rules vary from state to state, it is best to seek legal advice from an experienced attorney in your area to avoid any confusion.
For instance, the Illinois statute of limitations for oral contracts and property damages are both set for five years, while oral contracts offer shorter periods for suing a debtor. The longest statute of limitations in this state is for debts with a written contract between the borrower and lender. To determine the time limits for filing a lawsuit in your state, look for a chart online or seek legal counsel when in doubt.
What happens to Debts After Civil Statutes of Limitations?
Is the time limit to sue on your old debt over? Don’t expect to be free from any more creditor calls or demands for payments just yet! The money you borrowed, which you weren’t able to repay, has exceeded the statute of limitations is now time-barred. So, if a credit collection company reaches out to you about your loan you should apply caution and even avoid speaking to the bill collector as this may revive the debt or extend your time limit. As simple as an acknowledgment that the debt is valid, or a verbal agreement to pay back the debt to the collections agent, can lead to those scenarios.
If you’re unsure if your debt has been time-barred, then the Fair Debt Collection Practices Act (FDCPA) obliges debt collectors to tell you the truth about your time limit. Any debt collector who threatens to sue, or pressure you to settle while in possession of this knowledge, would have violated the Fair Debt act. Some states, such as California, require credit companies to notify consumers once their debt becomes time-barred.
What should you do with time-barred debts?
If your lenders reach out to you, check your credit report. This will help you see if the information passed on to you by the credit company is recent or accurate, or if they are already in violation of the credit reporting law.
Your debt time clock normally begins after the date you made your last payment, although some states start the counting after missing your first payment. Before the expiration period, you are vulnerable to lawsuits from credit collection agencies because of your delinquent debt. Sometimes, even when the time is up, collections can be aggressive and tricky to force you to restart the clock without your knowledge.
Below are the scenarios that can lead to resetting your clock:
- Making any new or recent activity on a time-barred account
- Making payment, either full or partial
- Acknowledging that you own the debt (either in-person or over the phone)
- Giving promises of repaying debts
How do I avoid the threat of collection?
Experiencing creditor harassment is not a small issue. For individuals in a rough financial situation, this can be very stressful. As such, below are a few ways for you to avoid being threatened, sued, or subjected to court action.
- Clarify if your debt is time-barred. If you do this via a phone call, as soon as the collector confirms that it is already time-barred, simply end the call without saying another word that could be interpreted as acknowledging or agreeing to repay it.
- Get the dates on your last payments. This relevant piece of information helps you determine on your own whether the limitations have passed.
- Ask for a debt validation letter. This provides you with relevant details about your debt. When making the request, it’s important to avoid making statements that could be misinterpreted as you acknowledge the debt.
Once the clock stops ticking, the decision to pay or not to pay the debt is on you. You have several options for handling your debt, according to the law. First, you can choose not to pay it, although that would reflect on your credit report for the next few years. Second, you can pay off a portion of the debt, but this will reactivate the debt and may lead to certain complications along the way. Third, you can pay all of the debt to prevent damages to your credit history.
Another option you can consider is to file for bankruptcy. This can help you discharge your credit card debts and other unsecured debts. Before making any moves, consult with a licensed bankruptcy attorney and ask if you’re eligible for this option.
Remember, the law has been created to protect and help you. Don’t let yourself suffer by not knowing what the laws are. Let us help you deal with debt. Consult a bankruptcy law expert from Cutler & Associates and get the legal advice you need today.