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Statutes Of Limitations On Debt



In the United States, most forms of debt do not last forever. Each state has a law known as a statute of limitations. The statutes of limitations create what the Federal Trade Commission (FTC) calls time-barred debts by establishing a limited length of time in which the debt is considered legally valid.

Types of Debt

  • Oral contract - You establish these debts through an oral agreement.
  • Written contract - You and your creditor have signed a written agreement for this type of debt.
  • Promissory note - This is a written contract in which the interest and payment terms of a debt are in the contract. Mortgages and most auto loans are promissory note debts.
  • Open-ended accounts - You incur this type of debt through a revolving line of credit. Credit cards are open-ended accounts.

State statutes of limitations can be confusing to decipher, and you may not always understand what type of debt you have. To complicate matters, each state has different timeframes for when the various types of debt expire. In some states, it is the same for each type of debt. Other states have a lower limit on oral contracts and open-ended accounts, while a select few states set lower limits on written contracts.

Start Date for Statutes of Limitations

Another factor that makes statutes of limitations difficult to understand is that state officials disagree about when the count begins. In some states, the count begins when you fail to make a payment. If you make a partial payment after this, the count may or may not end, depending on the state. In many states, the count does not begin until your creditor sends you a letter demanding you pay the debt in full.

Receiving Help for Past Debts

Statutes of limitations regarding debt can be very complicated, but you do not have to handle the situation alone. An experienced bankruptcy attorney can help you sort out any legal problems you may have regarding past debts.