How Long Can a Debt Be Owed Before Suing?

Filing a lawsuit is both costly and time-consuming, so many creditors prefer to stay out of court unless they think a debtor won't pay his bill. Different creditors have their own policies on filing lawsuits against defaulted debtors, so unless a creditor discloses its policy, a debtor won't know when he is vulnerable to a lawsuit. If a creditor does file a lawsuit, it must be within the state's statute of limitations for debt collection.

Unpaid Debts

Once a debtor fails to pay a bill on time, individual and business creditors have the right to begin collection efforts, which usually consist of calls, letters or even turning the debt over to a collection agency. Court systems often have their own guidelines on steps a creditor must take before filing a lawsuit, which may include making a good faith effort to collect a debt before going to court.

Statute of Limitations

Creditors have a limited amount of time to file a lawsuit after a debt becomes past-due. In many states, this can be as little as two or three years. If a creditor files a lawsuit after the statute of limitations period is up, the debtor can ask the judge to dismiss the case, making the debt uncollectible. In states that have a short statute of limitations, some creditors may file a lawsuit soon after a debtor defaults.

Court Judgments

Once a creditor wins a judgment against a debtor, the creditor is given the right to use additional collection methods, such as asset seizure and, in most states, wage garnishment. Court judgments are a matter of public record and do show up on debtor's credit reports, where they can stay for up to seven years if paid, and even longer if they remain unpaid.

Judgment Collection Limits

There is a statute of limitations on judgment debt collection, but it is usually much longer than the time period allowed for filing a lawsuit. For example, in Illinois, the statute of limitations on filing a lawsuit for debts secured by a written contract is 10 years, while the statute of limitations on collecting a judgment is 20 years. In many states, it is possible for a judgment creditor to renew the statute of limitations on a judgment, giving the creditor decades to collect payment.