It has happened to most everyone. You buy a car, a house, go to college--and create debt. Then something happens--you lose your job, your wife gets sick, your investments bottom out--all of a sudden, you are faced with debts you can't pay. And the phone calls keep coming. But in Michigan, there are limitations on how long different types of debt are collectible.
Statute of Limitations Defined
The statute of limitations (SOL) for debts is the maximum time frame in which a creditor must file a lawsuit to collect a bad debt. After the statute of limitations expires, a debtor (the person owing the money) cannot be sued to recover damages or money. A collection agency or creditor may still try to collect on the debt, but a court of law will not recognize any legal proceedings.
Commencement
The statute of limitations begins running at a given time. In general, that will be the time you made your last payment or charge. This is called "tolling" and can vary.
Michigan Statute
Michigan's Public Act 236 imposes "limitations of actions" in debt judgment and enforcement. Under Act 236, open accounts (including credit cards) are not enforceable six years after the statute of limitations goes into effect. While most written contracts (such as an auto loan or bank loan) may not be collected after six years, a sales contract may not be enforceable after four years--but a mortgage lasts 10 years for debt collection. Promissory notes and oral agreements are unenforceable after six years.
Fair Debt Collection Practices
Creditors may still attempt to collect debts, even after the statute of limitations has passed. The statute of limitations applies only to court action--not collection. In addition, creditors may still try to bring a lawsuit, and it is up to you to show that the statute of limitations has passed. In the meantime, while creditors may still call you, be aware that abusive practices are not legal. Collection calls must be between reasonable hours, and you may not be threatened with imprisonment, for instance. Under Michigan's State and Federal call recording laws, you may also record calls from collectors to prove abuse. You can also mail a cease and desist request on debts past the statute of limitations.
Credit Report
Remember, while you are not legally obligated to pay unrecoverable debts, your credit report is not tied to debt collection laws, which apply only to legal enforcement. Michigan, the same as every other state, allows "bad" debts to appear on your credit report for seven years from delinquency. Even if the statute of limitations has expired, it will still appear on your credit report. After the seven years, you can request its removal. Until then, you may dispute the record or attach an explanation.
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