Statute of limitations on debt is the length of time a creditor can take legal action against you to attempt to pursue collection on a debt. Once the time passes, that doesn’t mean you no longer owe the debt. Also, it doesn’t mean the creditor cannot still try to collect the debt. Statute of limitations means the creditor is no longer able to take you to court and attempt to get a judgment against you. These debts are time-barred debts.
If a creditor attempts to take you to court over a time-bared debt the burden of proving the debt has passed the statute of limitation will fall on you. In these situations the only thing the creditor must do is prove you own the debt.
- Oral Agreements do not have a written contract. There was/is only a verbal agreement.
- Written Contracts are debts with a written agreement that states terms and condition of the debt. Medical debts are generally considered written contracts.
- Promissory Notes are written agreements to pay back a certain amount of money, at a certain interest rate and by a specified time. Student loans and mortgages are examples of promissory notes.
- Open-ended Accounts are accounts with a revolving balance or an open-ended account. Credit cards or lines of credits are examples of open-ended accounts.
Signed contracts are enforceable in the district the parties execute the agreement. However, if you move the creditor can still pursue legal action against you. The creditors can sue you in the state you currently reside or have the judgment domesticated in the state you reside. As long as the judgment is still enforceable, most states will treat the foreign judgments the same as local judgments.
Debts excluded from statute of limitations are:
- Federal money (student loans)
- Child support
- Taxes (in most cases)
Extending Statute of Limitations
Most states have rules that allows for extending the statute of limitations or tolling. For example, if you have a debt in Florida, then temporarily move to North Carolina the time running on the statute of limitations set to an “on hold” status. When you come back to Florida the statute of limitations resumes again. Additionally, making a payment or a verbal promise to pay can reset the statute of limitations on the debt.
The statute of limitation and the time debt reports on your credit profile is independent of each other. Negative debt reports on your credit profile for 7 to 10 years. Make sure to check the statute of limitation before you consider paying a debt and extending the both the statute of limitation clock and the credit reporting clock. The table below shows four categories of debt and the respective statute of limitations of for that debt by state.
Statutes of Limitations by State
|State||Written contracts (years)||Oral contracts (years)||Promissory notes (years)||Open-ended accounts (including credit cards) (years)|
|Georgia||6||4||6||4 or 6|
|Illinois||10||5||10||5 or 10|
|Kentucky||15||5||15||5 or 15|
|Oklahoma||5||3||5||3 or 5|