Statute of limitations

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Bill collectors hounding you? Considering repaying or negotiating an old debt? The statute of limitations on bills, often referred to as tolling of time is a powerful tool for consumers. The SOL can thwart off lawsuits and collectors when attempting to collect or sue on dusty old debts.

If a debt is legally expired, you can escape being sued or having to pay it back. Likewise, it can be detrimental because many debtors unwillingly renew the SOL by making a partial payment or a written promise to pay which extends the statute.

The statute of limitations is a civil code. Each state has its own statute, For instance, the code section in Cal. Code of Civil Procedure § 337.

The legal meaning for statute of limitations is: THE TIME OF COMMENCING ACTIONS -Time allowed that litigation – lawsuit can be brought. After that time, it has expired. Statute is a law. Passed by legislation and varies by state. The original statute of limitations begins at the onset of the contract signing (see more below for time barred debts).

Statute of limitations vary from state to state but it is usually 4-6 years depending on the state. The term statute of limitations means the time allotted to legally enforce the debt. If a statute expires and someone sues you, it is up to you to bring the expired SOL defense.

Don’t assume an expired statute of limitations means the other party is barred from attempting to collect. It simply means that your defense is the expired SOL – not to enforce the lawsuit. The statute of limitations for your credit reports is separate. Items on your credit reports are seven years.

Federal Taxes SOL

Tax liens remain on your credit reports for 7 years from date satisfied, not filed. If they remain unpaid they can stay longer, however they are only collectable for 6 to 10 years with some provisions. Keep in mind that the tolling of the time (SOL) can be extended by offer in compromises and payments.

State Taxes SOL

Federal taxes do expire but many states have no SOL for state owed taxes. To know for sure, you need to read your state’s codes. You can usually find them at the attorney generals site for your state. From there locate your state laws and check. Usually it is under Taxation and Finance Code.

Or visit the State Taxation site and remember if you read the code and cannot find an actual SOL for collecting the tax, then the absence of such usually means there is NO SOL. You must read your own state law to see what the rule is for taxes. Some report (most) from date paid while others report from date opened or filed.

Are there separate rules for debts & credit reporting?

Many people confuse the statute of limitations to collect a debt with the time a debt is allowed to remain on your credit reports. The two are separate.  Credit bureaus are allowed a certain time frame to report debts.

Another big fear is that paying it will extend the time it is allowed to be reported on your credit. Debts are reported from FIRST delinquency or written off date, not by last activity or last payment. Exclusions would be tax liens, they remain from date paid for 7 years and can remain indefinitely if unpaid.

Paying a debt will not restart the clock for reporting it but you could restart the clock for collecting it, so if you pay it, either pay it in full or restrictively, as to have no worries. A promise to pay or partial payment can renew the statute in many states (you need to read your own state’s rule to know for sure), many people think that only a renewed promise to pay does this. That is not the case. Either or can renew the statute.

Signed Under Seal can extend Statute of limitations

A “signed under seal” provision is where some creditors will add it to the contract for further protection. It depends on the contract but generally adding a “signed under seal” will enforce a longer statute of limitations. The seal must be obvious, usually next to the terms on the front page. One also must consider state laws because some may enforce it while others do not. The best thing to do is read the Civil Procedure Code for your state and see if there is a mention of it.

Not many creditors use a signed under seal but some do. Courts have long recognized that the presence of the word “SEAL” next to and on the same line as the signature of an individual debtor on a promissory note is legally sufficient.  Credit Unions often use seals as added protection in case of default, bankruptcy or expired SOL.

What state should I use in figuring out the Statute of Limitations?

The state statute can be either where the debtor lives or where the contract was entered into. The creditor does have the right to choose the state with the longer statute but the creditor’s or collector’s location is moot. This is covered in Section 811 of the FDCPA and in Consumer Credit Protection Sec. 1692i.

Here is the rule;


–2) in the case of an action not described in paragraph (1), bring such action only in the judicial district or similar legal entity –

(A) in which such consumer signed the contract sued upon; or

(B) in which such consumer resides at the commencement of the action

NOTE: Actions involving Real Property securing your obligation –the venue is different. The rule is: Any debt collector who brings any legal action on a debt against any consumer shall –

(1) in the case of an action to enforce an interest in real property securing the consumer’s obligation, bring such action only in a judicial district or similar legal entity in which such real property is located.

What to do if the debt is not expired & you owe it

You may be “judgment proof” for a time if you are unemployed, on disability, retired, have no money or assets or similar. If a creditor or collection agency attempts to sue you and you are “judgment proof” then you need to respond to the judgment and state so. Not doing so or ignoring the lawsuit may land a judgment on your  credit reports. If you do begin to work again, up to 25% of your pay could be garnished.

You should never ignore a judgment. Even if you are sued you can often negotiate a reduced payoff to avoid the judgment being entered. This will show as a “settled debt” on your credit reports rather than a nasty judgment.

You also need to consider the following before you decide to pay

  • Is the debt valid? Remember, you have a right to have the debt validated.
  • Was the product/service defective?
  • Are the collection fees and interest rates higher than the state allows?
  • Has the collection agency violated any of your rights under the FDCPA?

The statute of limitations is very important when you have past due debts or charged off debts that you cannot or do not want to pay back. When a debt is created, there is an original SOL, the date of the contract signing. If you default on a new debt – meaning you never even made one payment then the SOL would be the date the contract was signed by you.

If you default on a debt that has had payment(s) then the SOL would be from the date of last payment. Why does this matter to you? Because many,  in fact millions of dollars in debt nationwide have an expired SOL but consumers rarely know this. If you pay back the debt after the statute of limitation has expired then you have just renewed it therefore making it collectible for another number of years.

Using an expired statute of limitations as leverage to negotiate a better credit rating can really improve your credit reports. By offering the creditor or agency a restrictive offer or telling them to cease and desist because a debt is legally expired,  you can definitely have the upper hand. Let’s face it, if you have to pay a derogatory debt shouldn’t you try to get the best deal possible? Of course. Don’t count on the collection agency or creditor telling you this either.

What about BK dismissed debts?

If a debtor files bankruptcy the tolling of time stops. If the bankruptcy is subsequently dismissed then the tolling of time begins where it left off. It does not begin from the date of dismissal.

What category does my debt fall under?

Oral Contract: You’ve agreed to pay money back via a verbal agreement. This can include your word, his word and a witness. These are harder to prove but are recognized as “oral contract”.

Written Contract: You have signed a contract or document promising to repay a loan or debt. Example is medical bills, cell phone bill, closed end signature loan or some secured loans like auto.

Promissory Note: It is like a contract loan except it contains more information about payback. Such information can be interest, principal, late fees etc. A home loan or HELOC can be a promissory note.

Open Ended Accounts: Just what it says, “open end” i.e., a credit card debt or revolving line of credit.

Is a check considered a written contract, what is the SOL for checks?

A check is not considered a “contract” although some may argue that it is (because it’s a signed promise to “pay”). A contract requires consideration by both parties (an offer and acceptance) and consists of nothing more than an (enforceable) promise to pay by one party, but no contract was drawn up by the other party.

What it is, is a negotiable instrument and therefore subject to governing UCC (uniform commercial code) if there is one for the state in question. UCC is where you usually find the time limitations on checks. Many states have their own specific (SOL) statute of limitations dealing with checks. Those would trump any general statute of limitations and even the UCC limitations.

The UCC is not a federal statute but rather a system set up to structure commercial transactions. Since it isn’t a federal rule there would be no supremacy clause (as in who rules, state or federal), but rather the state could choose to adopt it or not. Most states have adopted it.

According to FindLaw, a more specific statute rules over (trumps) a more general statute. Therefore if a certain state has a more specific statute it will often trump (rule over) the UCC entirely.

Bottom line: read the UCC but read the state rule as well and see which one applies –, is more specific or offers more protection. You will usually find the SOL for collecting the check in the state code.

“State List of Statutes of Limitations
(State, Code, Years)
ALABAMAAla. Code § 6-2-2 et. seq.6663
ALASKAAlaska Stat. § 09.10.010 et. seq.6633
ARIZONAAriz. Rev. Stat. Ann. § 12-541 et. seq.3663
ARKANSASArk. Code Ann. § 16-56-101 et. seq.6633
CALIFORNIACal. Civ. Proc. Code § 312 et. seq.2444
COLORADOColo. Rev. Stat. § 13-80-102 et. seq.6666
CONNECTICUTConn. Gen. Stat. Ann. § 52-576 et. seq.3663
DELAWAREDel. Code Ann. tit. 10, § 8101 et. seq.3334
DISTRICT OF COLUMBIAD.C. Code § 12-301 et. seq.3333
FLORIDAFla. Stat. Ann. § 95.011 et. seq.4554
GEORGIAGa. Code Ann. § 9-3-20 et. seq.466**4
HAWAIIHaw. Rev. Stat. § 657-1 et. seq.6666
IDAHOIdaho Code § 5-201 et. seq.4554
ILLINOIS735 Ill. Comp. Stat. 5/13-201 et. seq.510105
INDIANAInd. Code Ann. § 34-11-2-1 et. seq.610106
IOWAIowa Code Ann. § 614.1 et. seq.51055
KANSASKan. Stat. Ann. § 60-501 et. seq.3653
KENTUCKYKy. Rev. Stat. Ann. § 413.080 et. seq.515155
LOUISIANALa. Civil Code § 3492 et. seq.1010103
MAINEMe. Rev. Stat. Ann. tit. 14, § 751 et. seq.6666
MARYLANDMd. Courts & Jud. Proc. Code Ann. § 5-101 et. seq.3363
MASSACHUSETTSMass. Ann. Laws ch. 260, § 1 et. seq.6666
MICHIGANMich. Comp. Laws § 600.5801 et. seq.6666
MINNESOTAMinn. Stat. Ann. § 541.01 et. seq.6666
MISSISSIPPIMiss. Code. Ann. § 15-1-1 et. seq.3333
MISSOURIMo. Rev. Stat. § 516.097 et. seq.510105
MONTANAMont. Code Ann. § 27-2-2021 et. seq.5885
NEBRASKANeb. Rev. Stat. § 25-201 et. seq.4554
NEVADANev. Rev. Stat. Ann. § 11.010 et. seq.4634
NEW HAMPSHIREN.H. Rev. Stat. Ann. § 508:1 et. seq.3363
NEW JERSEYN.J. Stat. Ann. § 2a:14-1 et. seq.6666
NEW MEXICON.M. Stat. Ann. § 37-1-1 et. seq.4664
NEW YORKN.Y. Civ. Prac. Laws & Rules § 201 et. seq.6666
NORTH CAROLINAN.C. Gen. Stat. § 1-46 et. seq.3353
NORTH DAKOTAN.D. Cent. Code § 28-01-01 et. seq.6666
OHIOOhio Rev. Code Ann. § 2305.03 et. seq.615156
OKLAHOMAOkla. Stat. Ann. tit. 12, § 93 et. seq.3553
OREGONOr. Rev. Stat. § 12.010 et. seq.6666
PENNSYLVANIA42 Pa. Cons. Stat. Ann. § 5501 et. seq.4444
RHODE ISLANDR. I. Gen. Laws § 9-1-12 et. seq.15151010
SOUTH CAROLINAS.C. Code Ann. § 15-3-510 et. seq.3333
SOUTH DAKOTAS.D. Codified Laws Ann. § 15-2-1 et. seq.3666
TENNESSEETenn. Code Ann. § 28-3-101 et. seq.6666
 TEXASTex. Civ. Prac. & Rem. Code § 16.001 et. seq.4444
UTAHUtah Code Ann. § 78-12-22 et. seq.4646
VERMONTVt. Stat. Ann. tit. 12, § 506 et. seq.6653
VIRGINIAVa. Code Ann. § 8.01-228 et. seq.3563
WASHINGTONWash. Rev. Code Ann. § 4.16.005 et. seq.3663
WEST VIRGINIAW. Va. Code § 55-2-6 et. seq.10522
WISCONSINWis. Stat. Ann. § 893.01 et. seq.51065
WYOMINGWyo. Stat. § 1-3-102 et. seq.810108”


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