By Laura Royer.
When it comes to dealing with debt in times of a financial crisis, it is helpful to determine if any of the debts owed are time-barred and, if so, have reached the statute of limitations for collection. Personal Finance Managers (PFMs) can help clients determine if their debt is affected by the statute of limitations in their state.
Debt collectors have a limited timeframe
Debt collectors have a limited timeframe for when they can sue a borrower to collect money owed. A time-barred debt is a debt that has exceeded a state statute of limitations for when a debt collector can sue to collect payment. Each state has its own state statutes that vary by type of debt, the number of years for written and oral contracts, and where the family lives, as shown in the table below.
How to address a time-barred debt
If a borrower has a time-barred debt, he or she basically has three options for how to address it:
- Don’t Pay the Debt. Since the creditor cannot legally sue the borrower for the debt, the borrower could ignore this debt altogether. While the creditor has lost its right to sue the borrower to collect the debt, the debt does not go away. Debt collectors may continue to contact the borrower because the borrower still owes the money. If the borrower wants the debt collector to cease communications, the borrower must follow the proper protocol for ceasing all communications with a creditor. Also, the old debt could be still impacting the borrower’s credit. Debts stay on a credit file for seven years plus 180 days from the date of the last activity.
- Make a Partial Payment. If the borrower wants to make some of the payment so it reflects more positively on his or her credit, they can negotiate a partial payment with the creditor. It’s important to note that if the borrower agrees to any payment, it may reset the statutes of limitations clock and allow the collector to sue for the full debt plus any back-fees, like interest. If the borrower decides to make a payment, then they should get everything detailed in writing to protect themselves, specifically indicating that the creditor waives its right to sue or collect for the remaining balance of the debt.
- Pay It in Full. If the borrower feels obligated to pay the debt, then he or she could make the payment. If the borrower decides to do this, be sure he or she receives a letter from the collector indicating that the debt has been settled and that the borrower is released from any further obligations.
Trying to collect on a time-barred debt
If a debt collector tries to sue for a debt that is time-barred, the borrower should not ignore this summons. It’s important that he or she defends their debt collections rights. The borrower may want to consider talking to an attorney to discuss the time-barred debt and have the case dismissed. Be sure the borrower has documentation that shows the date of the last payment and verification from the debt collector. If the borrower doesn’t have the documentation, then they can ask the collector to provide a debt validation and verification of the debt based on their records. For help finding an attorney by state, borrowers can go to https://www.consumerfinance.gov/ask-cfpb/how-do-i-find-an-attorney-in-my-state-en-1549/
Statutes of Limitations by State
The following are the statutes of limitations (based on the number of years) for written and oral credit contracts.
| State | Written contract (years) | Oral contract (years) | Promissory (years) | Open-ended Accounts (years) |
| Alabama | 6 | 6 | 6 | 3 |
| Alaska | 3 | 3 | 3 | 3 |
| Arizona | 6 | 3 | 6 | 3 |
| Arkansas | 5 | 3 | 5 | 5 |
| California | 4 | 2 | 4 | 4 |
| Colorado | 3 | 3 | 3 | 3 |
| Connecticut | 6 | 3 | 6 | 3 |
| Delaware | 3 | 3 | 3 | 3 |
| District of Columbia | 3 | 3 | 3 | 3 |
| Florida | 5 | 4 | 4 | 4 |
| Georgia | 6 | 4 | 6 | 4 |
| Hawaii | 6 | 6 | 6 | 6 |
| Idaho | 5 | 4 | 5 | 4 |
| Illinois | 10 | 5 | 10 | 5 |
| Indiana | 6 | 6 | 10 | 6 |
| Iowa | 10 | 5 | 10 | 5 |
| Kansas | 5 | 3 | 5 | 5 |
| Kentucky | 10* | 5 | 10 | 5 |
| Louisiana | 10 | 10 | 10 | 3 |
| Maine | 6 | 6 | 20 | 6 |
| Maryland | 3 | 3 | 12 | 3 |
| Massachusetts | 6 | 6 | 6 | 6 |
| Michigan | 6 | 6 | 6 | 6 |
| Minnesota | 6 | 6 | 6 | 6 |
| Mississippi | 6 | 3 | 3 | 3 |
| Missouri | 10 | 6 | 3 | 5 |
| Montana | 8 | 5 | 5 | 5 |
| Nebraska | 5 | 4 | 5 | 4 |
| Nevada | 6 | 4 | 3 | 4 |
| New Hampshire | 3 | 3 | 6 | 3 |
| New Jersey | 6 | 6 | 6 | 6 |
| New Mexico | 6 | 4 | 4 | 4 |
| New York | 6 | 6 | 6 | 6 |
| North Carolina | 3 | 3 | 3 | 3 |
| North Dakota | 6 | 6 | 6 | 6 |
| Ohio | 8 | 6 | 6 | 6 |
| Oklahoma | 5 | 3 | 6 | 6 |
| Oregon | 6 | 6 | 6 | 6 |
| Pennsylvania | 4 | 4 | 4 | 4 |
| Rhode Island | 10 | 10 | 10 | 10 |
| South Carolina | 3 | 3 | 3 | 3 |
| South Dakota | 6 | 6 | 6 | 6 |
| Tennessee | 6 | 6 | 6 | 6 |
| Texas | 4 | 4 | 4 | 4 |
| Utah | 6 | 4 | 4 | 4 |
| Vermont | 6 | 6 | 14 | 6 |
| Virginia | 5 | 3 | 6 | 3 |
| Washington | 6 | 3 | 6 | 6 |
| West Virginia | 10 | 5 | 6 | 5 |
| Wisconsin | 6 | 6 | 10 | 6 |
| Wyoming | 10 | 8 | 10 | 6 |
*15 years for contracts entered into on or before July 15, 2014
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