There is no set time period that governs attempts by a creditor to collect a debt that has aged beyond the initial date of default. A creditor seeking to legally enforce the debt however may run afoul of the statute of limitations that precludes a plaintiff from filing a lawsuit against a defendant after a specified period of time has elapsed from the date the cause of action first accrued.
Established by State Law
The statute of limitations period for each distinct legal cause of action, e.g., fraud, personal injury, or breach of contract, is established by each state. The statute of limitations period for the same cause of action may vary from state to state.
Actions to Collect on a Debt
Since most debt arises from a legally binding contract, the applicable statute of limitations for most actions to collect on a debt would be determined by the limitations period established for breach of contract actions for the state in which the creditor resides. Some jurisdictions may have specific statute of limitations periods for debt arising from promissory notes or contracts under seal, or for debt arising from revolving credit cards, which are frequently characterized as "open account."
Starting the Clock
An action to collect on a defaulted debt must be filed in court within the period established by the applicable statute of limitations. The clock commences on the date the cause of action accrued, which for most actions to recover monies owed, is the date when the contract underlying the debt was breached or the date the account first went into default.
Considerations
When a creditor files a civil suit to enforce payment of a default balance owed, it is the responsibility of the debtor to raise the defense of the statute of limitations. Should the debtor fail to raise the affirmative defense, he will be deemed to have waived it. The rules of civil procedure in most states require a debtor to raise the defense in his answer to the creditor's complaint at the time the action is filed in court. A debtor who properly raises the statute of limitations defense can then request that the court dismiss the action.
Significance
A civil action for repayment by a creditor that is filed outside the specified statute of limitations period is characterized as "time-barred." If the debtor raises the defense in a timely manner, a court must dismiss the lawsuit. An action to recover a default balance owed that is dismissed for failing to comply with the statute of limitations does not extinguish the debt; rather, it means that the creditor has no further legal recourse against the debtor.
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