Tuesday, December 18, 2007

Let Sleeping Dogs Lie – Don’t Pay Your Ancient Debts

If a creditor waits for too long to collect and old debt, you may not have to pay it. All states have statutes of limitations – laws which require that a creditor sue to collect a debt on or before a certain date. If they do not file a lawsuit in time, then they are forever barred from suing to collect the debt. A lawsuit is filed when the complaint been filed with the proper court, and a filing fee has been paid. A complaint is the document where the creditor states to the court that you owe them money and provides the reasons for that claim.

Each state has statutes of limitations for certain types of debt. There are four types of debt. Oral Contracts are those where you verbally agreed to pay the debt. Written Contracts are those where you agreed in a signed writing to pay your debt. A Promissory Note is a written document you sign where you agree to pay the principal and interest on a debt according to a schedule. Finally an Open Account a rotating line of credit with a changing balance. Some states have the same statute of limitations for all types of debt, others have different ones.

When does the statute of limitations start? It starts when you miss your first payment. You can check the date of last activity on an account by obtaining a copy of your credit report.

Some collection companies specialize in buying debts whose statute of limitations has expired and trying to collect them. They try to get you to agree to make payments on the debt. By agreeing to make the payments, and making them, they create a new debt with a new statute of limitations. In a sense, they revive the old debt.

If you notice old debts on your credit report, or if a collector contacts you, before deciding to pay them or settle with the collector, talk with a lawyer in your state to see if you really owe the money. If you get sued on an old debt, make sure to claim the statute of limitations defense in your answer. If you don’t file an answer or don’t claim the statutes of limitations as a defense, you will lose your case.

Here is a table showing the Statute of Limitations in all 50 States. Most states have laws that stop the statute of limitations from running out if you are outside of the state or country. Also, some contracts have a provision that says that any lawsuit will be governed by the laws of another state. If you are sued, you should check with a lawyer to see if the statute of limitations defense applies to your debt.

State

Oral Agreement

Written

Agreement

Promissory

Note

Open Account

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

6

6

3

D.C.

3

3

3

3

Florida

4

5

5

4

Georgia

4

6

6

4

Guam

4

4

4

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

Oklahoma

3

5

5

3

Oregon

6

6

6

6

Pennsylvania

4

6

4

6

Puerto Rico

15

15

3

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

Virgin Islands

6

6

6

6



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1 comments:

Jim said...

Yeah, I only came across a similar post the other day:

Limitation Act

6 years for unsecured debt & 12 years for secured loans & mortgages. I'd never heard of it before, but it's definately worth knowing. Thanks for your post - more people need to be aware.

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