Millions of Americans each year struggle with the heavy burden of debt. What most people don’t understand is that there is a statute of limitations on past due debt. This could allow debtors to legally avoid paying an outstanding debt. How is the statute of limitations determined? How long can debt collection agencies contact you?
Different Types Of Creditor Agreements
An oral agreement between two parties is a binding agreement that is enforceable in court. These types of agreements are often referred to as a handshake agreement.
A written agreement is an agreement that puts into writing all relevant terms and conditions of repayment. Promissory notes are much like written agreements. The main difference is the inclusion of a payment and interest schedule. Student loans are an example of a loan that carries a promissory note.
The final type of agreement is the open-ended account. This type of account never closes even if you pay it off. A credit card is an example of an a open-ended account.
When Does The Statute Clock Start Ticking On Debt?
There are many different opinions as to when the statue clock starts. Some claim it starts as soon as the debt becomes past due. Other legal opinions claim the clock doesn’t start until a creditor sends a formal letter demanding payment.
Applying the statute of limitations can also depend on terms of the agreement you signed. You may agree that the statute of limitations doesn’t start until the creditor demands payment. Technically, you are not breaking the terms of the agreement if the creditor is not taking action against you.
Further complicating matters is the different state laws regarding how long creditors have to pursue legal actions. The amount of time before the statute of limitations runs out can even differ based on what type of agreement you have with your creditor.
Limitations Apply Differently To Different States
Each state will give a creditor a varying amount of time to pursue a lawsuit. A credit card company in Arizona has six years to pursue a lawsuit while a credit card company in Alabama only has three years. Both states allow creditors to pursue a lawsuit for up to six years on any agreement made with a promissory note.
States also start and end the statute clock at different times. Georgia will start the statue clock on credit cards when the debt is due. Illinois decided that credit card agreements that had no contract are only valid for five years. The state allows all other credit debt to be pursued for 10 years. 10 years for debt collection agencies to contact you is a very long time.
What If A Creditor Sues You After The Statute Runs Out?
It is possible that a creditor will attempt to sue you after the statute runs out. Don’t assume that you can simply make that claim in court. You have to have evidence that the statute has in fact run out. The courts will rule in favor of your creditors if you are not able to establish your case.
What should you bring to court? Bring any records that will prove your case. A credit card statement that is older than the statute of limitations should suffice. Check your credit report in the event you actually did pay off that debt. This would be crucial evidence that could allow the court to rule in your favor.
Understanding the law regarding the statute of limitations on debts can save you a lot of money. Don’t pay a PAST DUE NOTICE simply because your creditor threatens to sue you. Rolling over simply because you want to avoid a legal mess isn’t in your best interest. Hire a good debt lawyer who can represent you during your day in court. If you are within the statute of limitations for your state, give us a call toll free to settle your debts once and for all and be free of bill collectors and constant debt collection agency calls.