Unpaid debt that is delinquent can keep you from qualifying for a mortgage or getting an automobile loan at a favourable rate. Delinquent debts are listed on credit reports for seven years, usually as charge-offs or collection accounts. However, they never really go away. Unpaid debts never expire, meaning that theoretically, a debt collector could pursue you for an unpaid debt for the rest of your life.
Statute of limitations
State statute of limitation laws prevent debt collectors from collecting from you in court for unpaid debts after a certain period of time. The statutes vary by the state, but the average is about seven years for credit card debt. That means a debt collector cannot win a lawsuit against you forcing payment for the unpaid debt if the period to collect in court has expired---and you defend yourself by informing the judge that the debt is too old for court action.
Many people believe statute of limitations makes unpaid debts go away entirely. That is not true. You still owe the debt. The debt collector simply loses the right to win a court judgment making you pay. The debt collector can continue attempting to collect in other ways, but loses a big advantage when the threat of a court case is stripped away.
Some debt collectors file lawsuits even though the unpaid debt no longer appears on credit reports and isn't eligible for court action. The debt collectors are hoping that the mere filing of the lawsuit will entice some people to pay rather than appear in court. Many people do just that because they are unaware of their rights under state statute of limitation laws. A judge reviewing a debt lawsuit will dismiss the case if state statute of limitation laws confirm that the debt is outdated. However, the burden of proof and making the judge aware is the responsibility of the person sued, or the attorney.
Making a payment on an old debt can reset the statute of limitations, making the debt again eligible for court action. For example, say the statute of limitations on a debt in your state is 10 years. The debt was charged-off 12 years ago---the last date of activity for statute of limitation purposes. In this case the debt is too old for a lawsuit. However, making a payment---however small---resets the clock, giving the debt collector another 10 years to collect in court. People with really old debts should not talk with debt collectors or make partial payments unless they are prepared to resolve the entire debt.
A consumer affairs attorney can tell you if a debt you owe is beyond your state's statute of limitations. Or contact the local office of the state attorney general to ask about the statutes.
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