When collecting old debts, creditors are bound by the statute of limitations for the state in which the debtor lives. The state's statute of limitations decrees how many years a debt collector can file a lawsuit when collecting old debts. Lawsuits filed after the statute of limitations expires can be thrown out of court.
Time Frame
The statute of limitations commences on the day a consumer's debt becomes 180 days delinquent. Statutes vary widely by state, and each state sets different statutes for different types of debt. The statute of limitations for credit card debt, for example, frequently differs from that of a bank loan.
Features
In some states, consumers can stop or even reset the statute of limitations by acknowledging ownership of the delinquent debt or making a payment toward the overdue balance.
Warning
Some creditors and debt collectors attempt to sue debtors for debts on which the statute of limitations has already run out. An expired statute of limitations makes the debt "time-barred" and is a reasonable court defense against a debt collection lawsuit. If the debtor does not use the expired statute as a defense, the court may award a judgment to the creditor or collection agency.
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