Statute of Limitations (SOL)
Simply put, Statute of Limitations determines when a creditor or debt collector
may no longer sue you. As a consumer you need to be informed. That is the main reason
this site exists. Our belief is the more knowledge we share the more people we empower.
The Statute of Limitations (SOL) and My Consumer Rights
When does the Statute of Limitations Begin?
What If I Moved; What State Should I Use to Calculate the Statute of Limitations?
In Summary
Definitions of the types of Debts Covered by the Statute of Limitations
Statute of Limitations by State
The phrase “Time-barred” means the statute of limitations for your state protects
you from being sued. This can be anywhere from 3-10 years; in some states the period
is longer. Federal law imposes limitations on how debt collectors can collect debts,
including time barred debts. This includes lawyers who collect debts for others
on a regular basis not creditors collecting their own debts. The law prohibits debt
collectors from engaging in any unfair, deceptive or abusive practices while collecting
debt.
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How does the Statute of Limitations (SOL) Protect Me?
Consumers pay off collection accounts and charge-offs which they do not have to
pay off because the Statute of Limitations has already expired for the open account.
Many times a debt collector will threaten suit, therefore you may be inclined to
pay off this account.
The SOL is a powerful weapon in unburdening yourself of old debts, as creditors
have a limited time in which to sue you. Remember: the Statute of Limitations begins
to run from the day the debt - or payment on an open-ended account - was missed.
Don’t confuse this with how long a negative credit item can remain on your credit
report.
Consumers also pay off these accounts when they are on their credit reports. If
a collector calls you for payment, all you have to say is, "I have an absolute defense--the
Statute of Limitations has expired."
The Statute of Limitations does not cause your debt to go away after it expires.
If the creditor files suit it guarantees you the consumer an absolute defense. The
consumer must offer this as evidence to avoid a judgment. The evidence will consist
of papers the consumer files to support his claim. If the creditor sues you, and
you do not prove to the court that the Statute of Limitations expired, you will
have a lost lawsuit and a judgment will be made against you.
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When does the Statute of Limitations start?
You might be asking yourself "How do I determine when the statute of limitations
(SOL) is calculated?"
- Take the date you last made a payment and add 6 months to this date.
- Add the number of years of the statute of limitations in your state.
Example:
You last stopped paying on a credit card on May 2, 2007. The statute of limitations
for credit cards (usually regarded as open accounts) in your state is 6 years.
The date at which you are "safe" from having a creditor sue you over this debt is:
May 2, 2007 + 6 months = November 2, 2007.
6 Years + November 2, 2007 = November 2, 2013
Therefore, a creditor cannot sue you for this debt
after November 2, 2013.
Depending on what state you live in, if you make a partial payment, you could be
restarting the clock of Statute of Limitations. A collector might call you one day
and say you waived your rights when you made a deal with the collection agency.
Do not take anything a collector tells you for granted. Make them prove it to you,
in or out of court. For about half the population, the Statute of Limitations started
ticking the day last payment was made on their account.
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What If I Moved; What State Should I Use to Calculate the Statute of Limitations?
The way I understand it is that jurisdiction is based on where you live. Therefore,
if you’ve moved since opening an account, the SOL is based on the state in which
you currently reside. This can be argued and a creditor may try to hold you accountable
to the first state of the SOL is longer.
In Summary:
Even though a debt is an absolute promise to pay, if the Statute of Limitations
expiring is in force and the creditor tries to force you to pay the debt, you have
the right not to fulfill the promise (debt).
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Definitions of the types of Debts Covered by the Statute of Limitations
Oral Contract: You verbally agree to pay money loaned to you by someone (i.e., no
written contract, "handshake agreement"). Remember a verbal contract is legal but
tougher to prove in court.
Written Contract: A written document where you agree to pay on a loan under the
terms that you and your debtor have signed.
Promissory Note: A written contract. The big difference between a promissory note
and a regular written contract is that the scheduled payments and interest on the
loan also is spelled out in the promissory note. A mortgage is an example of a promissory
note.
Open-ended Accounts: All credit cards are revolving lines of credit with varying
balances. The Please note: a credit card is ALWAYS an open account. This is established
under the Truth-in-Lending Act.
Statute of Limitations by State
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