Debts and the Statute of Limitations

By Rachel Hunter

All civil causes of action are governed by the statute of limitations and debts are no different. The statute of limitations begins to run as soon as the right to suit first arises. In regard to credit card debt, that typically is the date on which the last payment was made or the date on which the first delinquency occurred. The problem with debts is that the statute of limitations can be a tricky thing – sometimes statutes say one thing and courts say another. Moreover, a debtor may take out a credit card in one state and then move to another state. This brings up the question of what statute of limitation applies (generally, its either the state where the debtor resides, the state where the credit card was obtained or the state law referenced in the contract – for more on this see Tolling and the Statute of Limitations).

Here is a link to a very handy chart: Most states generally fall somewhere between 3 and 6 years, although a few states have longer statutes of limitation. Because each situation may be different, if you think that a debt may be barred by the statute of limitations, check with competent legal counsel in the state where you reside to see whether the debt is barred.

Suits on Time Barred Debt

Some consumer-friendly states provide that it is an unfair and deceptive trade practice for a debt collector or original credit to get a debtor to acknowledge a debt that is barred by the statute of limitations or to bring lawsuit thereon. The federal Fair Debt Collections Practices Act (“FDCPA”) also contains a provision indicating that it is a violation of law to misrepresent the character or status of a debt. 15 U.S.C. §1692e(2)(A). However, the FDCPA only applies to debt collectors, not original creditors, and while it does prohibit a debtor collector from falsely implying that suit can be brought on a time-barred debt, it does not stop a debt collector from actually filing a lawsuit and not all states are consumer friendly.

In those states where there is no law expressly prohibiting a lawsuit on a time-barred debt, debtors must be extra vigilant. The statute of limitations is a waivable defense – that means that if you do not file an answer asserting the statute and you could have done so, then the defense is waived. In such cases, if the creditor gets a judgment against you, you will have to pay the judgment as most states have strict guidelines about vacating a judgment that has been properly entered. If you believe that a debt is barred by the statute of limitations and you sued, do not ignore the lawsuit. Immediately seek out legal counsel to see whether the debt is in fact time-barred and if it is to draft an answer for you. Here is a link to a helpful alert from the Federal Trade Commission (“FTC”) on time-barred debt:

Zombie Debts and Your Credit Report

Time-barred debts can be listed on your credit report, although there is a time limit for doing so. Debts that have not gone to judgment (judgments are separate) can stay on your credit file for 7 years after the debt is either sent to an in-house collection department, an outside debt collector or charged-off. A charge-off is an accounting term and means that the creditor has given up trying to collect the debt. It does not mean that you don’t owe the debt. A debt typically charges off somewhere between 90 and 180 days (roughly 3-6) months after the date of your last payment. So the maximum that a debt can remain on your credit is 7 ½ years from the date of your last payment.

Not all debt collectors follow the law and many of them will falsely attempt to “refresh” the date of the debt by using a different date to make it appear that the debt was more recent. If this happens to you, you have rights. First, you must dispute this in writing with each of the 3 credit bureaus – Equifax, Experian and Trans Union. Each have websites (www.equifax,com. and Ask the credit bureaus to investigate and tell them why the information about the debt is in error. Credit bureaus don’t do much of an investigation – basically, they ask the debt collector or debt buyer if the information is correct. If the debt collector or debt buyer affirms it, then that is the extent of the investigation. Your next step is to send a certified letter to the debt collector or junk debt buyer. If the debt collector or junk debt buyer refuses to remove the information, then go to an attorney as you can bring a lawsuit under the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x.

To get a free yearly copy of your credit report, go to That site will link you directly to each of the credit bureaus. Unless you are the victim of identity fraud or theft, stagger your free reports and get one from a different credit bureau every 4 months.

Revival of Time-Barred Debts

Although a debt is barred by the statute of limitation and even though a debt collector may be barred from misrepresenting the status or character of a debt, not all debt collectors are nice. If they told a debtor that a debt was barred, few debtors would ever pay voluntarily. Consequently, some debt collectors may resort to misrepresentations to try to get the debtor to acknowledge or affirm the debt or even make a payment thereon. If this happens, especially if you make a payment, it will “revive” the debt and cause the statute of limitations to start running anew. Recently, a very large junk debt buyer called Asset Acceptance got into hot water for a range of misrepresentations it made regarding time-barred debts. You can read about the settlement here:

Paying Time-Barred Debts

Even though a debt is barred by the statute of limitations, it does not mean that you don’t owe the debt. The statute of limitations is a legal defense – it only applies in court. That means that a debt collector is free to continue to try to collect on the debt. Should you pay? While you may no longer have a legally enforceable duty to pay, you may still have a moral duty to pay your bills. More importantly, you may have good reasons for wanting to pay, such as refinancing your home or getting a car loan at a decent rate of interest.

For debts that you believe may be time-barred, never agree that this is your debt or make a partial payment thereon without first talking to a lawyer and being apprised of your rights. Even if it is your debt and you feel obligated to pay, don’t just pay. If you want to pay something, that is fine, but you don’t want to accidentally revive the statute of limitations. Also you may settle a debt with a debt collector only to find out that the balance on the debt has been re-sold to another junk debt buyer, and unless you have proof then you may end up having to pay the same debt twice.

I thus recommend that you get an attorney to make sure that the debt is resolved correctly. However, if you are doing this on your own, always get a written agreement with the debt collector as to the terms before you pay. Never pay by a check by phone or personal check. Instead, get a cashier’s check, make a copy of the check and send it either by certified mail, return receipt requested or by UPS or FedEx (if the latter, make sure that you get the debt collector’s physical address). Once the payment is received, usually about 30 days later, call the debt collector and get a settled-in-full letter acknowledging that your payment was made and that no further monies are owed. Keep a copy of the check and the letter forever as debts have a way of re-surfacing (see Zombie Debts)!

Tolling and the Statute of Limitations

In the case of Avery v. First Resolution Management Corp., No. 07-35726, 2009 WL 861727 (9th Cir. April 2, 2009) (here is a link to the case: , the Ninth Circuit Court of Appeals found that a debt was not time-barred and that the law firm representing a junk debt buyer did not violate the FDCPA by filing suit to collect the debt. To understand the case, it is necessary to go into the facts. The debtor in that case lived in Oregon at all times. However, when the debtor applied for the credit card, the agreement provided that it would be governed by New Hampshire law. The debtor ultimately defaulted on the debt and the debt buyer filed suit long after the New Hampshire statute of limitations had expired. However, because the credit card agreement was governed by New Hampshire law, the “tolling” provisions provided that the statute of limitations did not begin to run while the debtor was absent from and residing out of the state at the time the cause of action arose. Therefore, the lawsuit on the debt was timely even though the debt was over 5 years old at the time it was brought.

Again, each state is different and has different tolling provisions. When a debtor receives a letter from a debt collector, don’t ignore the letter. Dispute the debt immediately by sending a certified letter to the debt collector telling the debt collector that the debt may be barred by the statute of limitations. If the debt collector sends a validation indicating a more recent date than the date of last payment, have the validation reviewed by an attorney to ensure that it comports with the law. Get the attorney to advise you on the state statute of limitations and any tolling provisions, if applicable.

Copyright (c) 2012 by Rachel Lea Hunter

All rights reserved. No part of this article may be reproduced or utilized in any form, other than for the reader's sole personal use, without permission in writing from the author.

NOTICE: The information in these articles is provided for general informational purposes only as a public service. You are advised to check for changes to current law and to consult with a qualified attorney in your state of residence on any legal issue. The use of this material does not create an attorney-client relationship with the Rachel Lea Hunter Law Office. The material in this website may be considered advertising under applicable rules.

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