Contrary to what some might assume, debts are not obligations which are free of any collections expiration date. State laws dictate statutes of limitations on debts. For those who may be in debt and wish clarification on how debt related statute of limitations works, the following overview will shed light on the basics of how the process.

Clarification starts with defining what exactly a statute of limitations actually is. By definition, the term refers to the amount of time in which an entity that is owned a debt has a legal right to collect the debt. Regardless of the circumstances surrounding the debt, the legal right to claim payment owed will have expired. The ability to enforce collection on the debt will be no more.

In order to enforce the claim on the debt, there must be a law (statute) which supports a legal claim for the debt. For example, if the statute of limitation on a debt is five years and six years have passed, any petition to the court to help procure the debt owed will be fruitless. A lawsuit can be filed but the case can be dismissed if it is proven the stature of limitations has expired. There is no legal basis present to maintain a legal claim to the debt anymore as the window to collect the debt legally will have been closed but the collector can still attempt collection. The legal term for such a debt would be a time-barred debt.

The most common question that will arise when discussing the subject of a statute of limitation would be when the countdown clock actually begins. The answer to this is rather straight forward. It would be the date of the last instance of activity on an account. For example, if you have a credit card and your last charge on the account is January 15, 2011, this would be the date the countdown to the statute of limitations begins.

Statute of limitations will vary from state to state. A debt which might carry a 4 year statute of limitations in one state would carry a 15 year statute of limitations in another state. In order to determine the specific statute of limitations of a debt in question, it is necessary to determine the specific number of years associated with the SOL in your state as it relates to the particular category of debt in question.

The different categories of debt are written agreements, oral agreements, promissory notes, and open-ended agreements. Oral and written agreements are self-explanatory. Promissory notes refer to loans with a set timeframe to pay off via monthly payments at a specified interest rate. A personal loan would be an example of such a debt. Open-ended agreements would be those where you can pay back money owed and continue to borrow on the account. Credit cards and lines of credit would be examples of these debts.

While understanding a basic overview of statute of limitation laws in your state is helpful, serious questions surrounding a particular debt you owe or are owed should be directed to an expert in this area of the law.

More information on how to deal with debt and the stuate of limitations and time-barred debt is available here.


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