Statute of Limitations (SoL)

Almost all the creditors, reporting on a credit report, have a statute of limitations for how long they can attempt to collect on a debt.  The statute of limitations is the legal time frame that the debt can be pursued through the court system.

There are some accounts that have no statute of limitations.  Below is a list of most of those debt types.

  • Federal Student Loans
  • Most Types of Fines
  • Past Due Child Support
  • Taxes and Tax Liens

The statute of limitations is typically based on the state your client lives in now, or the state the debt originally occurred in – the state they were in when they originally applied for the debt.  Every state is different, so you might have your clients research the limitations in their state on their account types.  They can research for their state’s civil debt collection codes.

According to the Fair Debt Collection Practices Act, most UNSECURED debt expires in 3-6 years.  Contracts such as car loans expire after six years.  Judgments can last up to 20 years and can indefinitely be renewed.

Those dates are typically based on the date of default (when the consumer stopped making payments), but some contracts might extend to the original contract date. This also varies based on state law.

These statutes are important for a few reasons.  Firstly, there are some disputes based on the debtor not being able to collect on the debt due to the statute of limitations expiring.

Secondly, this is why your clients probably don’t, in most cases, want to make any kind of payment to a collection company.  The time they can collect would then extend from the time your client made their last payment to that collection company or creditor.  This is why some collection companies make it so easy for consumers to pay with payments.

But even the Federal Trade Commission warns, “WARNING! While the statute of limitations (SoL) is running or even after it’s expired, making ANY payment or signing a promissory note can reset or restart (depends on your state law) the statute of limitations.”

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