Statute of Limitations on Debt

At some point of time the government started taking note of the increasing number of people harassed by debt collection agencies for old debts. Sometimes, the debts weren't even there and were paid off. Yet the debt collection agencies tried to make a quick buck by ripping off innocent people by trying to get them to admit that they have a debt which isn't theirs. The government had to act quickly to stop the increasing instances of this unfair debt collection method and brought about the statute of limitations on debt.

Details on Limitations

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 debt collection agencies suddenly pull that debt out of the closet and ask you to pay for it? Is it ethical to ask for money and force you to pay the money which you really do not owe?

I thought not. And so did the government. And so came about the statute of limitations on debt. This statute is like a expiry date for your debts. Once your debt crosses a certain age, it becomes non-collectable. So the debt collectors can trouble you all they can for the time within which it is collectible, but once it becomes crosses the limitation period, nothing can really be done about it.

Of course, there still a few things that you need to keep in mind about this statute.

Time
The first thing you need to ensure is how old the debt is. Different states have different number of years for debt collections. So you need to check what the statute for your state says before being sure that it is non-collectable.

Place
One more consideration is where you incurred the debt the last time. Suppose you incurred the debt in a state, which has a higher number of years for limiting the debt compared to the state you are presently residing in, then the debt collectors may still harass you. So make sure you know the rules for the statute of limitation with respect to the state in which you're currently living in as well as which you lived in before.

The Nitty-Gritty of Debt Collection
Now the rule says that the number of years for limitation are counted from the last transaction on this debt, and not for the duration you've had the debt. Suppose you have a credit card debt. Now the debt has been there ever since you got the credit card, but the number of years for counting the limitation depends on the last time you purchased something on the credit card. So make sure you're counting correctly. A copy of your credit report will tell you when your last transaction was made, in case you do not remember. The number of years for oral contract debt and written contract debts vary, so it make sure you check those too.

Have You Reactivated the Debt?
Debt collection agencies have come up with newer and smarter ways to separate you and your dollar. Credit card companies with such an expired debt may call you and ask you to make a transaction on your card, which will reactivate the debt. Debt collection agencies may even pester you and threaten you into accepting a debt which is older than the limitation and then when you unknowingly accept the debt, you end up activating it again and it becomes due again. Hence it is important that you completely dismiss the call. They may even threaten to sue you and take you to court, but if you know and they know that the debt has crossed the amount of years under the statute of limitations, it is usually a hollow threat. If they actually do take you to court, they can't do much about it anyway.

All Debts
Is the statute applicable to all debts? No. Of course your debts to the government are always collectible, statute or no statute. Debts like federal student loans, child support and income tax are exempt from the statute of limitations on debts.

Debt may become non-collectable, but it is still a debt and stays as a debt in your credit history. The statute does not eliminate debts. Debts can be eliminated only by paying them off.