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Statute of Limitations for Debts, Judgments & Taxes: All States

Bill collectors hounding you? Considering repaying or negotiating an old debt? The statute of limitations, 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.

You can check your SOL here and here

To be sure you have the most recent SOL for your state, we recommend checking both our links as well as the chart below which was last updated march 2011. To fully understand what the statute of limitations is, we recommend you also read the article "all about the statute of limitations". It's loaded with tips on how and why the SOL is SO important. The difference between knowing it and - can have a huge impact on someone facing lawsuits or collection activity.

SOL for Debts & Credit Reports Are Different

Please note, the statute of limitations for collecting a debt or being sued is not the same as the SOL for how long bad credit can remain on your credit reports.

(Image via creditcards.com - check their statute chart. Updated 2011)

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. (See complete legal meaning of Statute of Limitations). 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
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. See this link for more. Keep in mind that the tolling of the time (SOL) can be extended by offer in compromises and payments.

What about State Taxes
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. Go to our Attorney General page and click on your state. From there locate your state laws and check. Usually it is under Taxation and Finance Code. Or visit the State Taxation Site>. State Tax forms> 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 simply 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 SOL's 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. See reporting time for details.  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 SOL
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 SOL. 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.

In every state where there is the right to file suit on a debtor there is also a time within that suit may be filed. This is a powerful tool if you are aware of it.  Just remember a partial payment, promise to pay or regular payment on the debt can remove the limitation and the period can be renewed but again, keep in mind that it depends on state law.

Some states don't allow it to renew from payment while others allow the "tolling of time" to start again. Of course ,we cannot list every state rule here, there are too many- so unfortunately you will have to look at your state rule and probably the state rule for where the debt was incurred. I know this can get tricky but since the debt collector may be able to choose the state with longer SOL then possibly they too can choose the one with the extended SOL. Here is an excellent case study of a collection agency vs. debtor. The debtor is using the SOL defense. There is also a very common question about statutes of limitations and which state does the debtor follow.

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;

CONSUMER CREDIT PROTECTION Sec. 1692i.
--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. Try getting that off! 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? See state collection laws for info.
--Has the collection agency violated any of your rights under the FDCPA?

The SOL 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 SOL has expired then you have just renewed it therefore making it collectable for another number of years.

Additionally there is also an SOL for how long the debt can be reported on your credit. That statute is covered in the Fair Credit Reporting Act. The key to better credit is to acknowledge that a charged off or seriously past due debt will NEVER go current again. It will either be reported as a "paid charge off" or "paid collection account" and neither are good for you. Using an expired SOL 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. Read the end of this story for full details on the landmark opinion that answers this very important question. Remember, SOL's can be amended and change over time so to be sure your SOL below is correct, check out our collection laws for your state.

What category does my debt fall under?
Many times you cannot figure out if your debt is a contract, open end or revolving. Below we address this issue.

--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.

Related
See how long items can remain on your credit reports | Collection agency laws and statutes by state | The rule for debts charged off prior to 1997 under the FCRA | You can check your SOL here and here

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Repossession & Your Car | Bankruptcy - All you need to know | Statute of Limitations | Restricted Settlements | Judgments | Sample Letters | Credit Re-Scoring | Debt Management vs. Debt Negotiations | Credit Counseling vs. Debt Consolidation | DIY Credit Repair Help | How To Improve Your Credit History | Dealing with Tax Liens | Delinquent Student Loans | Collection Agency Abuse Tips | Best Credit Repair Resources on the Web | Credit Repair & Common Sense | Credit and Divorce | Attorneys General By State | Car Loan Default Consequences | Cease and Desist Letter | Collection Laws All States | Dealing with Medical Collections (HIPPA) | Credit cards & bad credit | How to fix your credit | What can a credit repair service do for you? | See All Credit Repair Articles--->

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