What is the Statute of Limitations on Collections?

The statute of limitations on collections of debts is varied and usually depends on regional laws. There are also certain debts that do not have a limitation and can be actionable for a person’s lifetime. Furthermore, the statute of limitations on collections doesn’t dictate the length of time a debt can remain on credit reports, and people need to understand that while they might be able to fight a lawsuit if a statute has expired, they could have a poor credit rating for a much longer time if they continue to let the debt stand.

In places like the US, many states define most types of debts and the statute of limitations on collecting on them. Some states have particular laws about how the length of time is calculated, and might consider a person leaving a state and being resident elsewhere as not countable when it comes to determining the amount of time the debt has stood. More generally, states can define debts as written or oral contracts, or promissory notes. Typically, the statute of limitations is shortest for oral contracts, and longer for written, promissory or open-ended types of debt.

Oral contracts usually have a two to three-year statute of limitations on collections, but it is very important to verify specific regional rules. Written contracts tend to have a four to six year statute of limitations, though they can sometimes be longer or shorter.

The statute of limitations on collections is not the same thing as the length of time that credit reporting agencies may receive reports about debt. Unless the debt is discharged in bankruptcy, which also gets reported for a lengthy period, the debt could be shown on credit reports for possibly 10 to 15 years. Moreover, an debt doesn't "go away" if it is never paid, regardless of how many years have passed. The statute of limitations on collections simply means that the original lenders or collection agencies can’t take the person to court and sue them after a certain time period. Technically they can still sue, but proof that the statute of limitations is exceeded usually results in the case being thrown out.

Certain debts don’t have a statute of limitations on collections. This is often especially true of any debts owed to the government, such as for traffic tickets, taxes or student loans. Not only can the government keep collecting on these, they usually have easy access to options that will begin repayment, such as garnishing paychecks. Since there is no limitation on how long the government can collect on the debt, there is also usually no limitation on how long the debt may be reported, and it may never be removed from credit reports unless it is fully paid.