Time-Barred Debt: Know the Statute of Limitations on Debt Collection

Time-barred debt is old debt that a creditor cannot sue you to collect, as it’s reached the statute of limitations. However, you do still owe the debt, and debt collectors may still contact you to try to get you to pay.

In this guide, learn how to determine if a debt is time-barred and what happens after the statute of limitations on debt is reached.

What is time-barred debt?

Debt becomes time-barred when it reaches the statute of limitations, which is the number of years a creditor has to sue a debtor over unpaid debts. This interactive map below shows the statute of limits on debt collection by state and type of debt:

Some types of debt, such as federal student loans, don’t have a statute of limitations. Meanwhile, federal tax debt reaches the statute of limitations after 10 years.

When a debt becomes time-barred, it doesn’t go away. You still owe the debt, although you can’t be sued for it. But because you can’t be taken to court over time-barred debt, you don’t risk having your wages garnished or any collateral seized.

How does time-barred debt work?

Time-barred debt can play in a borrower’s favor when a collector attempts to sue you over a debt that hasn’t been repaid in years.

Should a creditor or debt collector attempt to file a lawsuit against you for an old debt, they most likely won’t win if that debt is time-barred. However, they can still contact you regarding the debt and attempt to get repayment.

Legally, you don’t have to pay time-barred debt. However, should a creditor or collector contact you about debt that has been time-barred (or a debt that you’re unsure whether it’s time-barred), you’ll want to be cautious. If you make a payment on that old debt or confirm that you owe the money, it could no longer be considered time-barred.

What are the types of debt?

The statute of limitations on debt often depends on which type of debt it is. Debts can typically be divided up into four different categories.

Written contracts: A written contract is an agreement in writing. Written contracts typically include the details and terms of your agreement. For instance, a personal loan will typically require a written agreement between you and a creditor.

Oral contracts: This type of debt is verbally agreed upon, and has nothing in writing. However, this type of contract can still be legally binding.

Promissory notes: Promissory notes, like mortgages, are an agreement to repay a debt that’s broken up into smaller payments and set with an interest rate and terms.

Open-ended accounts: An open-ended account can take the form of a personal line of credit or credit card. It’s a type of account that comes with a capped amount that you can borrow against, and, once you pay that off, you can borrow more.

What are examples of time-barred debt?

Time-barred debt can take a variety of forms, including medical debt, credit cards, auto loans, mortgages, private student loans and state taxes.

For instance, let’s say you live in Arizona and have $2,000 in credit card debt, but you’re unable to make minimum payments. Your debt is eventually considered delinquent, since you haven’t paid your credit card debt bill in over three years. As such, if the creditor attempted to file a lawsuit against you, they would most likely not win in court, since credit card debt in Arizona is time-barred after three years. However, the debt will still negatively impact your credit score and eligibility for credit.

What is the time limit for debt collection?

There’s no real limit for when a debt collector can stop pursuing a debt. In most states, debt collectors may still try to collect after the statute of limitations has been reached. As long as they’re following the Fair Debt Collection Practices Act, this is completely legal.

If you’ve been contacted by a debt collector over a debt that you believe may be time-barred, ask these questions:

“Is this debt time-barred?” Debt collectors must answer truthfully, but they can also decline to answer.

“What do your records show as the date of my last payment?” This can help you determine when your debt will reach the statute of limitations.

“Can you send me a letter of verification?” If the debt collector doesn’t answer your questions, request a debt validation letter.

What happens if you make a payment on time-barred debt

Making a payment on time-barred debt can “revive” it, depending on your state of residence. This would essentially reset the statute of limitations on your debt, and you can be sued over the debt if you don’t continue to pay. The debt collector may even include additional interest and fees that the debt accrued while you weren’t paying it.

How do I know if my debt is time-barred?

When your debt becomes time-barred, you won’t get a letter in the mail or a push notification on your phone. You’ll have to determine if your debt has reached the statute of limitations with a little math and research.

Here’s how to find out if your debt is time-barred:

• Get a copy of your credit report. Get a free copy of your credit report from the three major credit bureaus at www.AnnualCreditReport.com.
• Determine your last debt payment. Looking back at your records, find the last time you paid toward your specific debt. This is the date you’ll use to calculate whether your debt has reached the statute of limitations.
• Understand the statute of limitations in your state. Each state has its own laws to determine when a debt becomes time-barred.

What should I do with time-barred debt?

When your debt has reached the statute of limitations, you might be wondering if you should pay it. Here are your options:

• Pay nothing. You can’t be sued over the debt, though debt collectors can continue to try to collect it. The debt will generally remain on your credit report for seven years, which damages your credit score and makes it more difficult to open a line of credit, get a loan or even rent an apartment.
• Settle the debt. You may be able to settle the debt for less than what you owe by negotiating with the debt collector. Get a signed agreement from the collector that confirms you’re settling the debt before you make a payment. If you don’t have a signed agreement, it might look like a partial payment on the debt, which could revive your debt.

Keep in mind that if you settle your debt for less than what you owe, it could still negatively affect your credit for up to seven years. However, you may be able to request that any negative information be removed from your credit profile during the negotiation process.

Tip: Do not make a partial payment on your time-barred debt without speaking to a lawyer. Paying even a small amount may revive your debt in some states, which means you could be sued over it — including any interest and fees that have accrued. Find out the laws in your state before making any payments on a time-barred debt.

Time-barred debt: FAQ

Can a debt collector contact me about a time-barred debt?

Some states still allow creditors and debt collectors to contact borrowers about time-barred debt. So, while they may not be able to legally force you to repay the debt, they can still attempt to collect it. You can get debt collectors to stop calling you by sending them a letter or an email.

How long does time-barred debt stay on my credit report?

Most delinquent debts will stay on your credit report for about seven years and can have a detrimental affect on your credit score. This information can stay on your credit report even after repaying the debt.

Should I pay back time-barred debt?

You aren’t legally obligated to repay time-barred debt. However, delinquent debt — even if it is time-barred — can still negatively impact your credit score for up to seven years.

What should I do if I’m sued?

Even if your debt is time-barred, creditors may still attempt to sue you for collection. If this happens, don’t ignore the lawsuit. Ignoring the suit could result in an automatic judgment against you. Speak with an attorney to discuss your rights and respond to the filing by the date specified on the court papers. If the statute of limitations on your debt has passed and you’re able to present evidence of the date of the last payment, it’s unlikely that the debt collector will be successful in court. Don’t ignore the lawsuit, and don’t accept liability without consulting a lawyer.