Different jurisdictions have different statutes of limitations in the United States. Debt has to be written off after a certain period of time. Every state has a time frame within which debt can be collected or the debtor can be sued. If that expires, debt must be expunged from the collector's books. States allow a space of between two to 15 years for the collection of delinquent debt.
The Statute of Limitations
Debt collection is governed by state laws across the United States. The laws provide guidelines for the lifespan of a debt before it must be written off. The statute of limitations (SoL) on debt collection varies according to states, but generally the creditor's claim to debt is six years after the debt is written off.
Why Limitations Are Important
The SoL is aimed at protecting debtors from creditors. Debtors would owe creditors for the rest of their lives if it were not for the SoL. For most people in debt, this law provides a breathing space and a time to realign their personal finances. The law protects consumers unable to pay debt from being abused or harassed by collectors. For instance, a creditor or debt collector cannot contact you after 9 p.m. local time or contact your employer at any time.
The Fair Debt Collection Act
The Fair Debt Collection Act (FDCPA) provides guidelines on legitimate debt collection practices and was amended in 2006. This amendment came amid overwhelming evidence that debt collectors were increasing the use of unscrupulous and unfair debt collection practices. For example, a debt collector cannot threaten to sue when he does not intend to or send documents purporting to be legal papers when they are not. Unethical conduct not only led debtors into losing their jobs, it created marital instability, according to the FDCPA. The U.S. Congress had to make changes in order to give the Federal Trade Commission enough authority to rein in these bad debt collection practices.
State Laws
Wyoming and Louisiana have the longest SoL. In Wyoming, open debt accounts, including outstanding credit card payments and oral agreements, can be collected up to a period of eight years. Creditors of written contracts, oral agreements and promissory notes in Louisiana can collect debt for up to 10 years. The District of Columbia, Delaware and Maryland have some of the shortest statutes of limitations. It takes three years for any kind of debt not payable to be expunged in the District of Columbia and Delaware. Maryland is the same, except for promissory notes which require a period of six years.
Creditors
Creditors can sue a debtor. But this has to be in a court with jurisdiction over where the defendant lives. For instance, a creditor based in Texas will have to sue his debtor in Manhattan, New York, if that is where he lives. However, there are exceptions in cases such as debt related to child support which is enforced in every state. Signed contracts are also an exception. The collector is allowed to sue in the jurisdiction where the debt was issued. When judgment is passed, collectors or debtors can use the statute of limitations where it was granted, or they can domesticate it to where the defendant is living. The collectors will most likely choose a place where the statute of limitations is longer.
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