Statute of Limitations on Debt

A statute of limitations can be defined as an enactment in a common law legal system. It sets the maximum time after an event that legal proceedings based on that event may be initiated.


Some reasons for statutes of limitation:


  • Over time, evidence can disappear or become corrupt, memories fade, crime scenes are changed and companies dispose of records

  • People want to get on with their lives and not have legal battles from their past coming up unexpectedly

The best time to bring a lawsuit is while the evidence is still rather fresh and as close as possible to the alleged illegal behavior. You don’t want to do it too late when the evidence has been lost. A limitations period begins when a cause of action is deemed to have arisen or when a plaintiff had a reason to know of the harm, instead of at the time of the original event. The opinions on when the statutes of limitation (for your ‘open account’) starts vary though. Some people believe it is when the credit card company sends you a demand letter for the full amount, but others believe it’s the first time you fail to make a payment on your account. Either one can be true, but it just depends on the credit card agreement you have. When you don’t make payment on time, you have violated the terms of your agreement and given the creditor a cause of action.

The length of the statute also varies from state to state depending on the type of agreement (i.e. written, oral etc.). A statute of limitations is pretty constant throughout all of the US states’ laws when it begins to run though.

There is also such a thing as a statute of repose, which is an idea closely related but not identical to statute of limitations. It limits the time within which an action may be brought and isn’t related to the accrual of any cause of action. In fact, the injury hasn’t had to occur, let alone have been discovered. Your ordinary statute of limitations typically begins running upon accrual time of the claim, whereas a statute of repose begins when a specific event occurs, regardless of whether an injury has resulted or a cause of action has accrued.

Keep in mind that the statute of limitations does not cause your debt to go away after it expires. If the creditor files suit, the consumer has an absolute defense, and the consumer must offer the new evidence to avoid a judgment. This evidence consists of papers and the consumer files to support his or her claim. Should the creditor sue you and you don’t prove to the court that the statute of limitations expired, you will have a lost lawsuit and judgment against you.