Knowing the debt collection statutes can assist in negotiating debt!
In addition to Credit Reporting Statutes of Limitation, there are statutes of limitation that apply to debt collections, in terms of how long a creditor has to collect on a debt using a lawsuit.
State laws will vary on debt collection, depending on the type of account. There are four types:
- Oral contract: Verbal agreement. This can include your word, the creditor’s word, or anyone who witnessed it. Harder to prove but is legally binding in most states.
- Written contract: Signed document promising to pay.
- Promissory note: A written contract with additional provisions; usually used for the purchase of real property. Notes can be sold to a third party.
- Open-ended account: Revolving lines of credit and credit cards. May be sold to a third party.
Most states fall within a three- to six-year statute of limitations range for collection, and if a debt is outside of the state’s limit, then it is no longer collectible and is considered junk debt. Would a debtor still owe the money? Yes, but it isn’t collectible through civil action. Once a debt is no longer reported on a credit report and is outside the collection statute of limitations, the debtor is off the hook unless the debt is for a tax lien, student loan, or child support. Some states may even have additional categories of debts that can be collected indefinitely.
For examples of variations in collection statutes, one doesn’t have to look very hard. In Oregon the statute of limitation is six years for all four types of debt, while in California it’s four for all types of contracts except oral, for which it’s two. Other states have additional quirks in the law. For instance, whereas Ohio and Kentucky both deem credit card contracts as written, some states view them as oral.38
A creditor may attempt to collect a debt that’s beyond the statute of limitations. If you’re served a summons under those circumstances, don’t ignore it. File an answer (or show up to court if it’s small claims) and present proof that the period for collection on the debt has expired.
Collection action running time reset.
While state laws specify time frames for collection actions, some can actually be reset in some states. The collection running period can be reset by payment or even by a simple acknowledgment that a debt is owed, among other things. Table 5 lists reset collection provisions for unsecured credit cards by state (there may be others).
Tip: Even if a debt collection statute is reset, the credit reporting running time cannot be reset.
Paying can hurt. Running can hurt. Failing to obtain a bankruptcy discharge39 after filing can hurt. Acknowledging that the money is owed can hurt. This is a tricky business, since in many cases you’re damned if you do and damned if you don’t. And yet there are some ways around these extension pitfalls, which I teach.40
| Collection Reset Statutes For Unsecured Credit Card Debt1(years) |
| STATE |
STATUTE
(Open/Written)
|
BEGIN DATE
(Clock Begins)
|
EXTENDERS
(Clock Reset)
|
| Alabama |
3/6 |
• date of last payment if BK2 filed |
• date of BK dismissal |
| Colorado |
6/6 |
• date of last payment |
• payment or
• debtor out of state or
• skipped
|
| Connecticut |
6/6 |
• date of default or
• date of last payment
|
• payment or
• new note
|
| Delaware |
3/3 |
• date of last charge or
• date of last payment or
• written acknowledgment
|
• payment or
• written acknowledgment
|
| Georgia |
4/6 |
• date of default or
• written acknowledgment
|
• payment or
• if BK dismissed, creditor has 30 days to file suit
|
| Indiana |
6/10 |
• date of last payment |
• payment or
• if BK dismissed, creditor has 30 days to file suit
|
| Maryland |
3/3 |
• date of last payment or
• written acknowledgment
|
• payment or
• written acknowledgment
|
| Michigan |
6/6 |
• date of last payment |
• payment |
| Minnesota |
6/6 |
• date of last payment |
• payment |
| Missouri |
5/10 |
• date of last payment or
• written acknowledgment3
|
• payment or
• written acknowledgment
|
| New Jersey |
6/6 |
• date of last payment or date of default; the later |
• payment or
• if debtor leaves state to avoid service of process
|
| New York |
6/6 |
• date of last payment or date of default; the later |
• payment or
• if debtor leaves state to avoid service of process
|
| Ohio |
6/15 |
• date of default or missed obligation under agreement or
• date of last payment
|
• payment or
• if debtor leaves the state then tolled4 until return
|
| Oklahoma |
3/5 |
• date of default or last payment; the later |
• payment or
• written acknowledgment
|
| Pennsylvania |
4/4 |
• date of last payment |
• payment |
| Tennessee |
6/6 |
• date of last charge or
• date of contract
|
• payment |
1 Check your local statutes. For some written contracts and in some states, if a contract is signed under seal, then the collection statutes are often longer. Such a document would have a seal next to the signature block. Signed under seal is very rare with credit cards, but it may be the case with some of them. Check your state laws.
2 BK is bankruptcy.
3 Only applies to the one acknowledging if co-debtor.
4 Tolling is when the running time goes into temporary stasis. |
Table 5.
_____________________________________
38. See table 6.
39. Bankruptcy dismissal is not the same as discharge. If a bankruptcy is dismissed, the debtor failed to complete it.
40. Some claim that restrictively endorsed checks may be a way around debt collection reset in some circumstances, yet this depends on the state, employment status, and other unique issues.
Debt Collection Statutes of Limitation by State
Not to be confused with Credit Reporting Statute of Limitations, Debt Collection Statutes of Limitation is how long a creditor has to collect using a lawsuit, in years.
Table 6.
Debt Collection Statutes of Limitation by State1 (years)
|
| State |
Oral
Agreements |
Written
Contracts |
Promissory
Notes |
Open
Accounts |
| Alabama |
6 |
6 |
6 |
3 |
| Alaska |
6 |
6 |
6 |
6 |
| Arizona |
3 |
6 |
5 |
3 |
| Arkansas |
3 |
5 |
6 |
3 |
| California |
2 |
4 |
4 |
4 |
| Colorado |
6 |
6 |
6 |
6 |
| Connecticut |
3 |
6 |
6 |
6 |
| Delaware |
3 |
3 |
6 |
3 |
| D.C. |
3 |
3 |
3 |
3 |
| Florida |
4 |
5 |
5 |
4 |
| Georgia |
4 |
6 |
6 |
4 |
| Hawaii |
6 |
6 |
6 |
6 |
| Idaho |
4 |
5 |
10 |
4 |
| Illinois |
5 |
10 |
6 |
5 |
| Indiana |
6 |
10 |
10 |
6 |
| Iowa |
5 |
10 |
5 |
5 |
| Kansas |
3 |
5 |
5 |
3 |
| Kentucky |
5 |
15 |
15 |
5 |
| Louisiana |
10 |
10 |
10 |
3 |
| Maine |
6 |
6 |
6 |
6 |
| Maryland |
3 |
3 |
6 |
3 |
| Massachusetts |
6 |
6 |
6 |
6 |
| Michigan |
6 |
6 |
6 |
6 |
| Minnesota |
6 |
6 |
6 |
6 |
| Mississippi |
3 |
3 |
3 |
3 |
| Missouri |
5 |
10 |
10 |
5 |
| Montana |
5 |
8 |
8 |
5 |
| Nebraska |
4 |
5 |
6 |
4 |
| Nevada |
4 |
6 |
3 |
4 |
| New Hampshire |
3 |
3 |
6 |
3 |
| New Jersey |
6 |
6 |
6 |
6 |
| New Mexico |
4 |
6 |
6 |
4 |
| New York |
6 |
6 |
6 |
6 |
| North Carolina |
3 |
3 |
5 |
3 |
| North Dakota |
6 |
6 |
6 |
6 |
| Ohio |
6 |
15 |
15 |
6 |
| Oklahoma |
3 |
5 |
5 |
3 |
| Oregon |
6 |
6 |
6 |
6 |
| Pennsylvania |
4 |
4 |
4 |
4 |
| Rhode Island |
15 |
15 |
10 |
10 |
| South Carolina |
10 |
10 |
3 |
3 |
| South Dakota |
6 |
6 |
6 |
6 |
| Tennessee |
6 |
6 |
6 |
6 |
| Texas |
4 |
4 |
4 |
4 |
| Utah |
4 |
6 |
6 |
4 |
| Vermont |
6 |
6 |
5 |
6 |
| Virginia |
3 |
5 |
6 |
3 |
| Washington |
3 |
6 |
6 |
3 |
| West Virginia |
5 |
10 |
6 |
5 |
| Wisconsin |
6 |
6 |
10 |
6 |
| Wyoming |
8 |
10 |
10 |
8 |
Table 6.
____________________________________
1. Check your local statutes. |
