Dear Experian, What is the statute of limitations on debt? I have an account on my report that was sold to a collection agency. Does the statute of limitations apply to the date of the original debt or the date of sale to the new agency? What can I do to correct this? - JWM Dear JWM, The statute of limitations on how long a debt can be collected is different than the amount of time a debt can remain on your credit report and they are set by different laws. Statute of Limitations on Debt and Your Credit Report The statute of limitations on debt refers to the amount of time a creditor or collection agency can try to collect the money owed. At the federal level, it is governed by the Fair Debt Collections Practices Act (FDCPA), and state laws may also apply. As a result, the statute of limitations for collecting a debt can vary by state. The FDCPA and state laws do not affect how long the account will remain on your credit report. The Fair Credit Reporting Act (FCRA) governs how long information can remain in a credit report.
It's important to find out whether the statute of limitations has expired on an old, unpaid debt. You'll need to find out what your state law dictates regarding the type of debt you have. However, other factors – like the lender's agreement or restarting the clock on your debt – could have an impact. Many or all of the companies featured provide compensation to LendEDU. These commissions are how we maintain our free service for consumers. Compensation, along with hours of in-depth editorial research, determines where & how companies appear on our site.
Statute of Limitations on Credit Card Debt A 'statute' is basically an act that has been passed by a legislative assembly or a body. Statute of limitations for different events that either come under the civil or criminal laws are prescribed by most of the legal systems across the world. In simple language, it can be defined as the time period during which a creditor can take legal action (i. e., sue the debtor) to enforce a debt. A case filed within the limited time is considered valid, and one that is filed after the prescribed time limit is considered to be void. The statute of limitations on debt is applicable to all credit card debt agreements. There are 4 principal types of agreements that are governed by this statute, which are oral contract, written contract, promissory note, and open-ended accounts. Credit card debt falls under open-ended accounts. The following table provides the state-wise time period of limitation. It must be noted that the legislative bodies may change the applicable period from time to time.
The statute is a generalized provision for court proceedings, and hence, must not be misused.
The one aspect of a statute of limitations that is pretty constant throughout all of US states' laws is when it begins to run. A statute of limitations, or limitations of action statute, begins to run when a cause of action accrues. That means, the statute begins to run when you have done something contrary to the terms of your agreement for which you can be sued. Most of the time, that "something" is failure to pay your bill. When you don't make your payment on time, you have violated the terms of your agreement and you have given the creditor a cause of action. Some credit agreements include an acceleration clause which must be invoked before a creditor has a cause of action. The acceleration clause could be activated by the creditor sending you a demand for payment in full by a certain date. In these instances, you must fail to pay the creditor after it has invoked the acceleration clause before the creditor has a cause of action, and the SOL starts to run. You need to become familiar with the terms and conditions of your specific agreement to know for sure which event triggers a cause of action and thus, begins the running of the statute of limitations.
Statutes of limitations by state Each state has its own statutes of limitations for different kinds of debt. Keep in mind that some credit card companies operate according to the statute in their home state, not yours. Here is a breakdown of each state's statute of limitations for different types of debt (in number of years).
Even though a statute of limitations protects you from being sued for a debt after a period of time, you still have an obligation to repay your debt. And morals aside, it takes seven years for a negative account to be removed from your credit report, which will make it difficult to get new credit or loans in the future.
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