Maybe you incurred a debt several years back and the lender has first approached you about paying back this debt. Or, maybe you have been receiving requests (maybe even demands) for debt repayment regularly for a period of time but have been ignoring them.
Many people in this position wonder, “Is there a defense to repayment of this debt?” There just may be.
How the Statute of Limitations Can Protect You
Under the law, there is a concept referred to as a “Statute of Limitations.” This legal concept goes back very far in time and is well established. In short, a statute of limitations is a legal principle that says that a creditor may only sue for repayment of a debt for a fixed period of time.
If that period of time has passed, the creditor may still “request” you pay back the debt. If a lawsuit is filed and the debtor raises the defense, the judge will dismiss the case. However, if the judge fails to dismiss the case, you may appeal the case and the appellate court will remand the case for dismissal.
Related article: How to Prepared to Pay Off Your Debt with Confidence
Before we go into the details of how statutes of limitations work and how the defense to repayment in the context of a lawsuit works, it is important to step back and describe in general terms how a situation arises that could implicate this legal doctrine.
Let’s say that 7 years ago, you took out a credit card and charged $500 worth of goods at a local Walmart or Target. After that initial charge of $500, you made a one-time payment of $50. But, after that one-time payment, you didn’t make any more charges and you didn’t make any more payments.
In this situation, you would owe $450 in principle and additional amounts in interest and penalties for failure to pay.
In response to your failure to pay, the credit card company sent you countless demand letters and called you repeatedly (on the phone) asking for payment. You ignored these calls and letters. The credit card company may have even sent your account to a “collection agency.”
Now, fast forward sometime and it has been 7 years since you made that initial charge and payment. The credit card company or the collection agency has filed a suit. You want to defend this suit and you are curious if you can defend the lawsuit by claiming that the statute of limitations has expired. The answer to whether this is a valid defense depends on your state’s laws.
How the Statute of Limitations Works
Here are some initial questions you may have in resolving this:
1) If the Statute of Limitations has expired, is it legal for the debt collector to file suit?
The short answer is “yes.” The Statute of Limitations is a defense that the debtor must raise. If you fail to raise it and the debt collector gets a judgment against you, then they may be able to collect even if it is true that had you raised the Statute of Limitations defense, the judge would have dismissed the case.
2) How long is the Statute of Limitations as it relates to my debt?
This is a more complicated and cumbersome question. If you live in the same state where you lived at the time you incurred the debt, the law of that state would apply. If you have moved since the time you incurred the debt, the laws of both where you currently live and the state where you lived at the time of the debt may apply.
Generally speaking, the Statute of Limitations in most states is between 3 to 6 years.
3) Does the type of debt impact the Statute of Limitations?
Yes, in fact, in nearly every state the Statute of Limitations is longer on a written contract than a verbal one. For example, if your uncle lends you $500 and you verbally agree to pay it back, your uncle may have a shorter time period to file a suit against you (possibly 3 years) than if you signed a promissory note with your uncle to pay the same $500 back.
Evaluating the Statute of Limitations for Your Personal Debt
There are a few ways to evaluate the strength of your defense that the debt you owed should not have to be paid back because of the Statute of Limitations.
First, you can obviously do an internet search based on the state where you live and the type of debt owed. As examples, you may search things like, “What is Statute of Limitations in Georgia for a loan of cash for structured settlement,” or “Defense to car loan based on Statute of Limitation in Illinois.” One must be careful, however, to ensure that the website you are reviewing is credible, state specific, and updated.
You may also speak to a civil attorney in your area that would be able to tell you quickly (and with minimal cost) the basic answer to the length of the Statute of Limitations.
Finally, the consumer protection agency or the attorney general in your state may be able to provide you with general information on the types and lengths of the Statute of Limitations in your state.
Never, ever, rely on the attorney of the debt collector to provide you with accurate and objective advice. His or her entire goal is to get you to pay or acknowledge a debt, even if it would otherwise be barred by the Statute of Limitations.