Is There a Statute of Limitations on Debt?

A statute of limitations on debt is a time limit on how long a debt collector is allowed to sue someone in court and force them to pay off any outstanding money owed to them. When a borrower meets the statute of limitations on debt, lenders or creditors may no longer be able to force them to pay the debt in court. The statute of limitations on debt varies by state and based on debt type.

The statute of limitations on debt is not a catch-all solution for all old money owed. There may still be consequences to failing to pay back time-barred debts, even when the statute of limitations has run out. And some debts, like student loans, are not subject to statutes of limitations. Here are the major differences to understand.

What Is The Statute of Limitations on Debt?

Essentially, a statute of limitation on debt puts a time restriction on how long a debt collector is able to sue a borrower in court, forcing them to repay any outstanding debts. In practice, this means that if a borrower chooses not to pay the debt, the collector does not have a legal remedy to force them to pay.

To be clear, just because a debt is outside the statute of limitations doesn’t mean that the borrower no longer owes the money, but it does mean that the lender may not be able to take you to court for non-payment. The borrower will continue to owe the money borrowed, and their non-payment could be reported to the credit bureaus for as long as allowed under the applicable credit reporting time limit , which is generally seven years.

Some debts, like student loans, are exempt from the statute of limitations on debt. There are no limits on when a debt collector can sue a borrower in court to repay federal student loans, regardless of how much time has passed since there was last account activity.

How Long Until a Debt Expires?

The length of the statute of limitations is determined by state law. State statutes of limitations on debt vary from three years to more than 10 years , depending on the type of debt.

Figuring out exactly which state’s laws your debt falls under isn’t always as simple as it may seem. The applicable statute of limitations may be determined by the state you live in, the state you lived in when you first took on the debt, or even the state where the lender or debt collector is located. The lender may even have included a clause mandating that the debt is governed by a specific state’s laws in the contract you signed.

One commonality among every state’s statute of limitations on debt is that the “clock” does not start ticking until the borrower’s last activity on the applicable account. That means that if, for example, you made a payment on a credit card two years ago, then entered into a payment plan with the debt collector last year—but never made any subsequent payments—the statute of limitations clock would start on the date that you entered into the payment plan.

In this example, simply entering into a payment plan counts as “activity” on the account. This can make it confusing to determine if the statute of limitations has expired on your old debts, even if you haven’t made a payment in a long time.

It may be possible to find out what the statute of limitations is by contacting the lender or debt collector and asking for verification of the debt. Remember that agreeing to make a payment, enter a payment plan, or otherwise making any activity on the account—including simply acknowledging the debt—may restart the statute of limitations.

After the debt has exceeded its statute of limitations, the debt is considered time-barred.

Limitations on Debt Collection

Although statutes of limitations on certain old debts don’t stop you from being sued over an old debt, it is a defense you can raise if you are sued. Even if the debt is past the statute of limitations collectors can still try to recover what you owe, debt statute of limitations doesn’t protect you from creditors continuing to attempt to collect payments on the time-barred debt. Remember, you still owe that money whether or not the debt is time-barred by a statute of limitations. The statute of limitations merely prevents a lender or debt collector from pursuing legal action against you indefinitely.

Debt collectors may continue to contact you about your debt for a time, but under the FFair Debt Collection Practices Act debt collectors cannot sue or threaten to sue you for a time-barred debt.

Some debt collectors, however, still may still try to take you to court on a time-barred debt. If you receive notice of a lawsuit about a debt you believe is time-barred, you may wish to consult with an attorney about your legal rights and resolution strategies.

Disputing Time-Barred Debt with Creditors

If a debt collector is contacting you to attempt to collect on a debt that you know is outside of the applicable statute of limitations and you don’t intend to pay the debt, you can request that the debt collector stop contacting you.

One option is to write a letter stating that the debt is time-barred and you no longer wish to be contacted about the money owed. In the case that you’re unsure, it may be possible to state that you would like to dispute the debt and want verification that the debt is not time-barred. If the debt is sold to another debt collector, it may be necessary to repeat this process with the new collection agency.

Remember, just because a collector can’t force you to pay the debt once the statute of limitations expires, there may still be consequences for non-payment. Creditors may continue to contact you through the mail and by phone.

Additionally, most unpaid debts can be listed on your credit report for seven years, which may negatively affect your credit score. That means that failing to pay a debt may impact your ability to buy a car, rent a house, or take out new credit cards, even if that debt is time-barred by the statute of limitations.

Limitations on Student Loan Debt

Student loans are not subject to debt statutes of limitations. That means that lenders or debt collectors are not time-barred from suing you in court to collect the money you owe, no matter how long ago you stopped paying on the student loan debt.

One solution to managing your student loans is consolidating or refinancing them in order to decrease the loan term or secure a more competitive interest rate.

Borrowers who only hold federal student loans may be able to consolidate them with the federal government to simplify their payments—and that ensures you keep the protections that come with federal student loans, like forbearance and income-based repayment options. However, refinancing or consolidating student loans with a private lender forfeits the borrower from having protections that federal student loans have.

Borrowers with a combination of both private and federal student loans, may consider student loan refinancing as one worthwhile option to get a new interest rate and/or a new term. Depending on an individual’s financial circumstances, refinancing can potentially result in a lower monthly payment or help borrowers pay less over the life of the loan.

The Takeaway

The statute of limitations on debt creates a limit for how long debt collectors are able to sue borrowers in a court of law. Once a debt has reached the statute of limitations, it is considered time-barred. Any action on the account has the potential to eliminate any progress a borrower has made toward reaching the statute of limitations. The statute of limitations on debt varies based on state laws but is often between three to 10 or more years.

Student loan debt does not have a statute of limitations. Borrowers who are looking for strategies to simplify their repayment may consider refinancing their student loans. Qualifying borrowers can secure a lower interest rate, which could ultimately result in owing less money in interest over the life of the loan.