It is no secret that unpaid debts can lead to a lot of problems – problems which have the ability to follow you around and make life miserable for many years. Yet although defaulted debts can haunt you for a long time in most cases these debts cannot haunt you forever. Consumer protection laws place strict time limits upon how long you can legally face consequences for most types of delinquent debt.
Credit Reporting Limitations
There are 2 separate statute of limitation clocks when it comes to unpaid debts. The first clock, outlined in the Fair Credit Reporting Act (FCRA), regulates how long derogatory accounts (paid or unpaid) are allowed to remain on your credit reports. This clock varies based upon the specific type of account, but most derogatory accounts must be removed from your credit reports after around 7 years. Collection accounts, for example, are legally required by the FCRA to be removed from your credit reports after 7 years from the date of default on the original account.
Time Barred Debt
The credit reporting time limits mentioned above have nothing to do with your debt collection time limits. Those time limits are governed by a second clock. This second statute of limitation clock, known as the debt collection clock, determines how long a creditor may be allowed to sue you in an attempt to collect your unpaid debt.
Once the debt collection clock has run out your debt becomes what is known as “time barred.” Of course until a debt is time barred your creditor (or the collection agency who now owns the debt) may have the right to file a lawsuit against you if you have failed to hold up your end of the agreement – an agreement which you likely signed in the form of a promissory note whenever you took out the debt initially.
Where credit reporting limitations are regulated under the FCRA on a federal level, the amount of time which must pass before a debt becomes time barred is regulated state by state. Because the time limit placed upon debt collection is determined by the states the amount of time you can potentially be sued can vary greatly. The time limit is based not upon where the collection agency or the original creditor is located, but rather upon the state in which you resided whenever you initially signed the promissory note for the debt.
Here is a chart to help you determine how long a debt collector may legally be permitted to sue you.
|State Where You Lived When Debt Incurred||Number of Years You Can Be Sued|
|SC, NH, NC, MS, MD, DE, District of Columbia||3 Years Before Debt Becomes Time Barred|
|TX, PA, CA||4 Years Before Debt Becomes Time Barred|
|FL, ID, NE, OK, RI, VA||5 Years Before Debt Becomes Time Barred|
|WI, WA, VT, UT, TN, SD, OR, ND, NY, NM, NJ, NV, MN, MI, MA, ME, KS, HI, GA, CT, CO, AR, AZ, AK, AL||6 Years Before Debt Becomes Time Barred|
|MT||8 Years Before Debt Becomes Time Barred|
|WY, WV, MO, LA, IA, IN, IL||10 Years Before Debt Becomes Time Barred|
|OH and KY||15 Years Before Debt Becomes Time Barred|
The best way to protect yourself from the possibility of being sued is of course to pay your credit obligations. However, that is often easier said than done. After all, if you are currently facing credit problems such as unpaid debts then chances are high you probably did not set out to purposely find yourself in this situation.
You may not be able to afford to simply pay off your debts at this point, especially if penalties, fees, and interest have continued to accrue. If you think the amount you are being charged is to high, believe believe you are being treated unfairly, or if you suspect your rights may have been violated remember that it may be a good idea to reach out to a professional for advice with your debts as well. Creditors, collection agencies, and even the credit bureaus do not always play by the rules and it may help to have an expert in your corner.