Statute of Limitations on Debts

Before reading it is important to note that you should always check with your state to verify this information.  I believe it is correct but always double check.

The Statute of Limitations is how long a debt is considered collectible by law and a time line for when creditors can sue you.  You should know that every single day people pay on debts that they are not required to by law. The do so because they think it is still valid. They may see it on their credit report and assume “It is my debt and I need to pay it”.  While the moral side of you may believe the debt should be paid, by law once out of statute of limitations you co not need to pay this and can not be ordered to pay it.  Now the previous sentence is a bit tricky. A creditor or collection agency can take you to court and can get a judgment IF you do not show up and defend yourself.  It is as simple as bringing paperwork that shows the Statute of Limitations over.

For many people, having this knowledge is a great burden taken off their shoulders and they can move forward.  The SOL runs from either the day of your last payment or the date payment was demanded from you.

If you are contacted by a collection agency after the loan is out of Statue of Limitations, you can simply write them and tell them your account is outside of the SOL and to please cease any contact.  They may write you one more time to say they will cease contact but that is it.

Remember.. if you are sued you NEED to show up in court and defend your self by presenting the SOL’s for your state or they will get a default judgment against you and you can’t fix that later.

The chart below shows the State Statutes of Limitations for various kinds of loan agreements and is for all states.

What Defines An Oral Contract: A verbal agreement is one that is considered a legal and binding agreement.  However it is not easy to prove it in court.  This is when you make a verbal agreement to borrow some money and repay the money.

What Is A Written Contract: This is a written document that both  you and the lender both sign.  This can be a very formal document or a crude one you just wrote on a napkin.

What Is A Promissory Note: This is where you agree to pay a loan as listed in a written contract. In a promissory note, the payments and interest and spelled out in detail.  A mortgage is an example of a promissory note.

What Is An Open-ended Accounts: These are account with revolving lines of credit. Meaning you have a certain limit that you can charge up or pay down and charge again.  A credit card is always considered an open account.