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
to the other parties attention.
If you say nothing or do not bring up the
expired statute then the judgment
can be entered. Don't assume
it 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. If your statute of limitations has expired
that means that the debt cannot be enforced by lawsuit, that
does not dismiss the debt and the creditor can still leave
it on your credit for 7
years (excluding some public records, those can remain
for 10 years) but legally you do not have to pay it if the
statute has expired.
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.
Fix
your credit yourself for much less!
Educate yourself before you pay anyone to fix your credit! Credit
and collection articles, sample letters, credit repair ebook, free debt elimination
ebook and more all for a one time low fee!
Cheaper than hiring a credit repair company and keeps you in control at all times.
You control your credit reports and identity by doing credit repair or debt validation
yourself. Learn more
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 creditors or collectors 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" ie: 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.
Notice:
These pages are protected. Do not plagiarize or redistribute
elsewhere.
Did
you know that access to the articles, e-learning, credit repair ebook,
sample letters and more is only a one time fee of $39.95? We
offer Credit Expert Kristi Feathers Ebook and articles exclusively, you
wont found them elsewhere! Purchase today to become your own "Credit
Expert!" Learn More>
