Statute of Limitations on Collections

Let's start with a story.Jane, a good friend from San Francisco, started receiving calls from a debt repurchasing agent, who kept asking her to pay her credit card bill, of a card which she had lost long ago. She claimed to have paid the amount before, through a credit counselor, although she had no record of that transaction. Fearing a court case, she paid whatever amount the agent demanded, to get out of the mess. However, as it turned out, the caller was from a bogus agency which had fooled a lot of other people previously. Jane did not know anything about a certain 'statute of limitations', and therefore paid the price (pun unintended).

A lot of people like Jane need to know, whether such a statute actually exists. Well, the answer is- Yes, and a debtor can prevent the creditor from dragging him to court once the stipulated period elapses. Certain aspects of the statute are discussed below, to avoid another Jane-like situation.

What is the Statute of Limitations on Collections?
The statute is like an expiry date, beyond which the creditor cannot use the court of law to force the debtor to pay up the debt. This period starts right from the time when the debtor turns delinquent, and his credit amount becomes overdue. This date can be determined from the date of the last payment transaction of the bank account in question. Also, it is different for different states.

There are times when certain creditors try to collect their debt after the statute of limitations period has passed away. This is where knowledge regarding the statute of limitations comes handy. If this period has elapsed, the creditor cannot file a law suit against the debtor for not paying up the amount. The debtor, as a proof, can present the credit report or credit history of his bank account as a proof of his last date of payment. The debtor has to note that any transaction from the concerned account, even though it may not be connected with the credit repayment, should not be made, as it can restart the statute of limitations period once again.

There are basically four types of debt contracts a person may enter into

• Open Accounts
  Open ended accounts are the ones which have rotating lines of credit like credit card accounts.
  
• Promissory Notes
  A promissory note is the written document on which a person signs and agrees to pay off the loan along with the interest. An example of a promissory note could be mortgage.
• Written Contract
  A written contract is when a debtor and creditor, both sign a written document agreeing on the terms of payment. Bank or auto loans are examples of a written contract.
  
• Oral Contract
  As the name suggests, when the debtor agrees to pay the debt back to the creditor, through an oral agreement or contract.

Each of these types of debts have a different statute of limitations period, which also varies state-wise. The table below gives the statute of limitations period in all states of the United States of America for various debts.

Statute of Limitations on Collections for All States

State	Open Accounts (credit cards)	Promissory Notes	Written Contracts (loans)	Oral Agreements
Alabama	3	6	6	6
Alaska	6	6	6	6
Arizona	3	5	6	3
Arkansas	3	6	5	3
California	4	4	4	2
Colorado	6	6	6	6
Connecticut	6	6	6	3
Delaware	3	6	3	3
District of Columbia	3	3	3	3
Florida	4	5	5	4
Georgia	4	6	6	4
Hawaii	6	6	6	6
Idaho	4	10	5	4
Illinois	5	6	10	5
Indiana	6	10	10	6
Iowa	5	5	10	5
Kansas	3	5	5	3
Kentucky	5	15	15	5
Louisiana	3	10	10	10
Maine	6	6	6	6
Maryland	3	6	3	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	6	5	4
Nevada	4	3	6	4
New Hampshire	3	6	3	3
New Jersey	6	6	6	6
New Mexico	4	6	6	4
New York	6	6	6	6
North Carolina	3	5	3	3
North Dakota	6	6	6	6
Tennessee	6	6	6	6
Texas	4	4	4	4
Utah	4	6	6	4
Vermont	6	5	6	6
Virginia	3	6	5	3
Virgin Islands	3	3	3	3
Washington	3	6	6	3
West Virginia	5	6	10	5
Wisconsin	6	10	6	6
Wyoming	8	10	10	8

Note: All figures represent 'number of years'

It should be noted that, once the statute expires, it does not wipe off the debt which the debtor owes. He is still liable to pay the amount, except that the creditor cannot win such a case in the court of law. He can, however, use other means to get back his money.