Statute of Limitations for Collection of a Third-party Debt

Those having trouble with old debt should look into the statute of limitations for debt collection of a third party. While a statute of limitation doesn't prevent a third party from attempting to collect a debt, it does provide you with an affirmative defense in civil court. If your debt is older than the local statute of limitations, you may well welcome a lawsuit, because this will help put the matter to legal rest.

State Law

There is no federal law on the statute of limitations for the collection of third-party debt. This means that the law varies from one state to another throughout the country. Depending on what kind of debt you are talking about, the statute of limitations may be as long as 20 years -- and the creditor may be able to renew its claim on the debt at the end of this time period. Look at your local state law for specifics.

Types of Debt

Even within a state there are different laws on different kinds of debt. Open accounts, more commonly referred to as credit card debt, are a common type of debt with which people have trouble getting dismissed. Written and oral contracts are subject to different statutes of limitations. Another type of debt that may have a different statute of limitations depending on the state where you live is a bad check. Court judgments have their own statute of limitations and may be renewable.

Tolling

"Tolling" refers to the age of your debt. Again, laws vary from one state to another and for different types of debt. Generally speaking, however, debt begins tolling the last time that you pay down on it. Whenever you make a payment, the "clock" starts over again. This means that if the statute of limitations is five years and you make a payment after a four-year lapse, you must wait another five years before using the statute of limitations as a defense.

Scavenger Debt Collectors

If years have gone by without you being contacted about a debt and you hear from a collector, you most likely are hearing from a so-called "scavenger" agency. These agencies purchase very old debt for a fraction of its original cost and use highly aggressive -- and some argue, unethical -- methods to collect that debt. They may even try to collect debt that is past the statute of limitations. Do not admit that you owe the money or agree to make any payments on the old debt.