What Is a Time-Barred Debt?

What Is the Statute of Limitations for Debt Collection?

For debt collection cases, statutes of limitations are state laws that limit how much time a person or company has to sue you for a debt. These laws limit the amount of time a creditor or debt collector has to file a lawsuit against you (the borrower) to try to collect on the debt.

If the creditor or debt collector doesn’t bring legal action before this time limit expires, the debt will become time-barred. Once a debt is time-barred, creditors and debt collectors can’t sue you to collect that debt.

The statute of limitations only applies to legal action. It doesn’t stop all collection activity. Creditors or debt collectors can still attempt to collect a time-barred debt, but they can’t sue you for it. Although you still technically owe the debt, you can ignore debt collection phone calls and other communication without fear of legal action. (Better yet, tell them to stop contacting you.)

If someone tries to sue you for a time-barred debt, you can use the statute of limitations as a defense in the lawsuit. 

What Is a Statute of Limitations Defense in a Debt Lawsuit?

The court doesn’t automatically dismiss a debt collection lawsuit if the debt is time-barred. If someone sues you for a time-barred debt, you must respond to the lawsuit and raise the statute of limitations as a defense. 

This means that your response needs to tell the court that the statute of limitations for this debt has expired. You may also need to show up on the court date and tell the judge that the statute of limitations has expired.

Why Are There Statutes of Limitations for Debt?

Statutes of limitations were created to encourage creditors and debt collectors to bring lawsuits without unnecessary delay. They help provide peace of mind to potential defendants (the person getting sued) by removing unending uncertainty about the potential of a new lawsuit. 

The statute of limitations only applies to lawsuits. It doesn’t affect how long your debt is reported to the credit bureaus or how much it affects your credit history. Negative information, like accounts sent to collections, usually stays on your credit report for seven years.

How Do You Figure Out Which State’s Statute of Limitations Applies to Your Case?

Because statutes of limitations differ by state, you need to know which state’s laws apply to your case. Usually, your debt is governed by the laws of the state where you live. 

Though it’s less common, sometimes the terms of a debt agreement will specify that a different state’s laws apply. Look for a "choice of laws" provision in your contract to see if this applies to you.

Statutes of Limitations Also Vary by the Type of Debt Contract

Not only do statutes of limitations differ by state, but they can also differ by the type of debt or contract. Once you’ve identified the state that has jurisdiction over your case, you must determine which statute within that state’s laws applies. 

For example, consider the following statutes of limitations related to debts:

• A written contract statute of limitations is usually the longest time frame.

• An unwritten contract statute of limitations is usually shorter.

• Open account or credit line statute of limitations may be the shortest. Although this originates as a written contract, there is no written contract for each additional charge. As a result, some states treat these as unwritten contracts.

When Does the Statute of Limitations Start?

Once you know which time period applies to your case, you’ll have to figure out when that time period begins to run.

This, too, will vary by state and should be laid out in your state’s statute. There are many possibilities, including the following:

• The date of the last charge on the account

• The date of the contract

• The date the account first became delinquent

• The date the last payment was made

Although a statute of limitations may seem simple and straightforward, it isn’t. It may be wise to consider consulting with an attorney or seeking free legal help to determine whether your debt is time-barred. 

What Should You Do If Someone Contacts You About a Time-Barred Debt?

The statute of limitations only applies to lawsuits. This means debt collectors may still try to contact you about old debts that are time-barred by the statute of limitations. This is especially true for credit card debt. 

If you get contacted about a debt you suspect is time-barred:

• Ask the debt collector about the statute of limitations

• Verify the debt

• Don’t make a debt payment

Ask When the Statute of Limitations Expires

The federal Fair Debt Collection Practices Act (FDCPA) requires debt collectors in all states to reply truthfully if you ask when the statute of limitations for your debt expires under applicable state law. 

Some states have stronger protections. For example, debt collectors in California must tell you if a debt is time-barred (even if you don’t ask). The collector must include the notice in the first written communication it sends you after the statute of limitations expires.

Verify and Validate the Debt

Any debt collector that contacts you is required by law to tell you certain information about the debt that it is attempting to collect. This information includes:

• The name of the creditor

• The amount owed

• A statement that you may dispute the debt

• A statement that you may request the name and address of the original creditor if it’s different from the current creditor

Don’t Make a Payment on the Debt

If you are contacted by a debt collector about a time-barred debt, don’t make a payment. This may revive a zombie debt and restart the statute of limitations. A zombie debt is an old debt that is likely uncollectible, but making a payment could put you back on the hook for the debt balance. 

Before you admit to owing anything or make a payment, you can and should send the debt collector a debt verification letter asking about the original creditor, the amount of the debt, and your options for disputing it. 

Get Legal Help if You Need It

Some debt collectors continue to try to collect the debt until it is paid in full, even if it is time-barred. The collector is hoping that you won’t know your right to raise time-barred debt as a defense to a lawsuit or that you’ll just pay the debt to get the collector off your back. Sometimes, debt changes hands so many times that the collector doesn’t even know the statute of limitations has expired.

An attorney can help you if you are being repeatedly contacted by a debt collector requesting repayment of a time-barred debt.

Check Your Credit Report

After you are contacted about a time-barred debt, review your credit report carefully. Creditors often report negative information about such debt as if it's recent information, which may be a violation of the Fair Credit Reporting Act (FCRA).

Remember, you can get your credit report for free, and you have the right to dispute any inaccurate information on your report. Getting inaccurate information off your credit report is one easy way to boost your credit score.

How Should You Handle a Time-Barred Debt if You’re Sued?

The statute of limitations only applies to lawsuits. Even after the statute of limitations for a debt has expired, you still legally owe the debt. This means collectors may still legally try to collect it using any other means — unless you live in Mississippi, Wisconsin, or North Carolina. 

In those three states alone, your repayment obligation is permanently terminated once the statute of limitations period is reached on that debt. In other words, residents of those three states no longer owe the debt after the statute of limitation expires.

Use the Statute of Limitations as a Defense

In all other states, if a creditor or debt collector is suing you for a time-barred debt, you’ll need to raise the statute of limitations as a defense in the lawsuit. If you don’t, the debt collector could obtain a judgment against you for the amount of the unpaid debt. The good news is that when you raise the statute of limitations as a defense, this should result in the judge dismissing the case.

You also have other legal remedies against parties that try to collect time-barred debts. If you received a discharge of the time-barred debt in a bankruptcy case, you may be able to sue for a violation of the discharge injunction. 

Know Your Rights Under the FDCPA

The Fair Debt Collection Practices Act (FDCPA) also provides remedies in this situation. For example, the FDCPA requires the collection agency to stop contacting you if you’ve asked them to do so in writing.

What Is the Fair Debt Collection Practices Act (FDCPA)?

If the original creditor can’t get you to repay a debt, it may send the debt to collections or charge it off and sell it to a third-party debt buyer. Debt buyers buy past-due debts and try to collect them — often with little consideration of the age of the debt they’re collecting. 

The Fair Debt Collection Practices Act is a federal law that limits the actions of third-party debt collectors. Under the FDCPA, debt collectors include collection agencies, debt buyers, and lawyers in the business of debt collection. 

The FDCPA applies to consumer debts, including credit card debt, personal loans, and medical debt. It doesn’t apply to original lenders or creditors or to debts incurred by businesses. 

The Federal Trade Commission (FTC) enforces the FDCPA with the help of the Consumer Financial Protection Bureau (CFPB). 

Let’s Summarize…

Statutes of limitations set time limits for creditors or debt collectors to bring a debt collection lawsuit against you. These statutes vary by state and by the type of debt or contract in place. 

It’s not uncommon (or illegal) for debt collectors to attempt to collect time-barred debts. This is why it’s important to know your rights under the FDCPA and to know the statute of limitations for the debt type in your state. Also respond carefully if a debt collector contacts you about a debt you believe may be time-barred. Always ask for a debt validation letter, and don’t make even a partial payment until you’ve verified the debt is valid and collectible.