Debtor and Creditor

How Long Can a Creditor Collect on a Debt?

By Carron Nicks, Attorney
Creditors can collect old debts for years. But they lose leverage, and you lose the incentive to pay, as the debts age.

Because a creditor can continue trying to collect from you until you are gone, you’ll pass away before your unpaid debts will. However, the reality is that you’ll likely stop hearing from your creditor after your debt is too old to report to a credit bureau.

What Is the Statute of Limitations?

The statute of limitations is a period of time in which a creditor must sue you. Otherwise, the creditor will lose the right to get a money judgment against you. (Most creditors need to file a lawsuit and get a money judgment to force you to pay through collection techniques, such as taking money from your paycheck or bank account.)

However, just because the statute of limitations has expired doesn’t mean the creditor must stop collecting all together. The creditor can continue to call you and send demand letters. (Also, your car lender might still be able to repossess your car, and your mortgage holder might be able to foreclose on your house).

Here are a few commonly-asked questions:

  • How long is the statute of limitations?Every state has laws establishing a deadline for a creditor to bring a lawsuit on a debt. In most cases, the statutory period will range from three to ten years from the date of the last activity on the account.
  • What does “statute of limitations as an affirmative defense” mean? Just because the statute has run doesn’t mean the creditor won’t try to file a suit. The statute of limitations doesn’t exactly prohibit a creditor from filing a lawsuit. Instead, the statute of limitations prevents the creditor from getting a judgment against you if you defend the lawsuit and bring the statute of limitations argument to the attention of the judge. Fighting the lawsuit because it is too old is called raising an affirmative defense. You’ll need to do this by filing a motion with the court.
  • Can a creditor get a money judgment after the limitations period? If you ignore the lawsuit, the court is likely to enter a judgment against you. Once the judgment is entered, the statute of limitations no longer matters. The creditor can use collection tools to garnish your wages or levy against your bank account, and, even take your assets and real estate.

If the statute has run, the creditor may be violating the Fair Debt Collection Practices Act (FDCPA), or your state’s debt collection laws, by filing the lawsuit or even threatening to file one. Victims of deceptive collection practices can bring suit under the FDCPA for damages (or use that right as leverage to settle the debt). If you learn that the creditor has filed suit against you, it’s important that you contact a qualified consumer lawyer as soon as possible to discuss your rights.

(For more information, read How Long Can a Creditor Sue You?)

What Collection Activity Can I Expect After the Limitations Period?

After the statute of limitations passes and the threat of a judgment has evaporated (or lessened), the creditor has lost much of its leverage to force payment. But, with very few exceptions, you are still liable for the debt until it is paid in full. The creditor is still free to call you, send demands for payment, and offers to settle for less than what you owe.

Creditors don’t usually keep non-performing loans for long. Typically, they will package dozens or even hundreds of accounts together and sell them to a company that specializes in buying bad debts, often for just pennies on the dollar. You might find that your account changes hands regularly. You might also find that these creditors seem to pay little attention to the age of the account or whether the statute of limitations has passed.

Can Creditors Collect Old Debts Not on My Credit Report?

Creditors aren't likely trying to collect on bad debts that are more than seven years old. At seven years, the creditor loses the ability to report negative information to the credit bureaus—and with it, leverage against you. (This assumes that a creditor doesn’t have a money judgment. It’s not unheard of for a creditor with a judgment to wait for the equity in your house to grow, force the sale, and then, due to growing interest, take a chunk substantially larger than what you originally owed.)

Under federal law, negative information that is more than seven years old should drop off your credit report entirely. Because the old debt can’t hurt you, you’ll have little incentive to pay it. At that point, few creditors will put effort into trying to convince you otherwise. But, it is theoretically possible that a creditor could pull something—like filing a lawsuit—to catch you off guard.

Can Creditors Collect Against My Probate Estate?

When you pass on, if you leave a will or your heirs have to open a probate proceeding to administer your estate, your creditors (at least those that can be found) will be notified of your passing and given a chance to file a claim against your estate. This will truly be the final collection activity a creditor can undertake. Once your estate is distributed to your heirs, there won’t be anyone from whom a creditor can collect.

Filing for Bankruptcy

One way to avoid the problem of an old debt resurfacing, or your loved ones getting stuck paying forgotten bills, is filing for bankruptcy. A bankruptcy attorney can review your financial situation and determine whether a Chapter 7 bankruptcy or a Chapter 13 case would be best for you.

Questions for Your Attorney

  • What is the statute of limitations in my state?
  • I’m getting sued—did the creditor violate the statute of limitations?
  • Do I qualify to file for Chapter 7 bankruptcy?
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