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What's the Statute of Limitations on Debt? Learn How it Helps You

Arjun Kulkarni May 13, 2019
You'll be glad to know that there is a statute of limitations on debt collections which can safeguard you from an old debt. In this write-up, we will look at some basic features of this law.
At some point of time, the government started taking note of the increasing number of people harassed by debt collection agencies for an old outstanding loan. Sometimes, the debts weren't even there and had been paid off.
These agencies tried to make a quick buck by getting innocent people to admit that they have a debt which wasn't theirs. The government had to act quickly to stop the increasing instances of such unfair collection and hence, brought about the statute of limitations on debt.


Is it fair to inherit the liabilities owed by your forefathers? Supposed your deceased father had taken a debt many years ago. Is it correct that the collection agency should suddenly pull out that debt from the closet and ask you to pay for it? Is it ethical to force you to pay the money which you really do not owe?
This law is like an expiry date for your debts. Once it crosses a certain age, it becomes non-collectable. Of course, there are still a few things that you need to keep in mind about this law.


The first thing you need to check is how old the loan is. Each state has defined its own time limit for debt collections. So you need to check what the statute for your state says before being sure that it is non-collectable.


Secondly, consider where you incurred that debt. Suppose, you took a loan in a state which has a higher time limit compared to the state you are presently residing in, then the lender may still harass you. So make sure you are aware of the law with respect to the state which you're currently living in as well as which you lived in before.

The Nitty-Gritty

Now, the rule says that the number of years for limitation are counted from last transaction and not for the duration you've had the debt. Let's assume you have an outstanding credit card debt and it has been there ever since you got the card, but the number of years for counting the limitation depends on the last time you purchased something on the card.
So make sure you're counting correctly. A copy of your credit report will tell you when your last transaction was made. The number of years for oral and written contracts vary. So make sure you check those too.

Have You Reactivated the Debt?

Credit card companies may ask you to make a transaction on your card, which will reactivate the old outstanding. Debt collection agencies may even pester you and threaten you into accepting a debt which is older than the limitation. However, when you unknowingly accept the debt, you end up reactivating it, and it becomes due again.
Hence, it is important that you completely dismiss the call. They may even threaten to sue and take you to court, but if it has crossed the time limit under the statute, it is usually a hollow threat. If they actually do take you to court, they can't do much about it anyway.


This statute is not applicable to all debts. Dues to the government are always collectable. Funds like federal student loans, child support, and income tax payments are exempt from this law.
A debt may become non-collectable, but it still stays in your credit history. Therefore, the statute does not eliminate debts. It is advisable to pay off a legitimate debt so that your credit score doesn't suffer.