Debt Collection Statute Of Limitations

Whether you are a company seeking debt recovery, or a debtor who has unpaid bills to pay, it is important for you to understand the debt collection statute of limitation. It refers to the time period that collection agencies can legally sue debtors for delinquent and unpaid debts. This implies that the unpaid debts come with an expiration date, after which the third party has to stop their collections activities. However, the statue of limitations on debt collection may vary from state to state. This shouldn’t be confused with time limit required for credit reporting.

What is the time period for debt collection statutes?

The time period for debt collection statute of limitations starts from the last date of reported activity on the debtor’s account. This date is shown on the credit report. However, remember that this date varies from the date that the account became delinquent. Here ‘activity on account’ refers to making a payment, entering into a payment agreement, or promising a payment.

How can debt collector statute of limitation benefit business owners?

Knowing the exact function of the statute of limitations on debt collection will help the business owners use the rules to their advantage and devise correct debt collection strategies. Business owners must be aware that allowing late paying customers to make partial payments or enter into a payment agreement can re-start the statute of limitations time clock all over again, further stretching the process.

What is included in debt collection statute of limitation?

Debts excluded under the rule include the child support, federal student loans, and federal and state income taxes. There is no expiration date for these types of accounts, thus the time period system doesn’t work here. Some of the types of agreements covered by the debt collection statute of limitations include:

  • Open-ended account of credit cards
  • Promissory Notes including mortgages
  • An oral agreement to repay (however this type is hard to prove)
  • A written contract signed by both parties