A lot of people get the statute of limitations confused with the FCRA credit reporting time. While they’re both time limits related to debt, they have different effects.
The statute of limitations for collecting a debt is the period of time that a creditor or collector can obtain a judgment through the court system to force a person to pay for a debt. The time period starts on the account’s date of last activity (DOLA) and varies by state. Even if the statute of limitations has expired, some debt collectors will continue to attempt to collect. They’re hoping the person doesn’t know about the statute of limitations and will pay if they threaten enough.
Be careful to insure your clients don’t restart their statute of limitations. Any time you take action with an account, the statute of limitations is restarted. Making a payment, making a promise of payment, entering a payment agreement, or making a charge using the account can restart the statute of limitations on an account. When the clock restarts, it restarts at zero, no matter how much time had elapsed before the last activity.
Keep in mind that when the statute of limitations expires, it only prevents a collector from winning a judgment against the person. It does not:
Erase the debt. If the debt is legitimate, the person will still owe it.
Prevent the debt from being reported on your credit report. The debt can be reported as long as the FCRA credit reporting time limit allows.