Statute of Limitations on Debt Collection – Power AdviceStatute of Limitations on Debt Collection: In an effort to control debt resolution duration, the court system created and enacted statute of limitations codes. The statute of limitations on old debt indicates the amount of time, in years, that creditors have to file a claim for money owed on the account. Court officials in each jurisdiction assigned a particular length of time for debts owed in that area. Once the debt ages past the indicated limitations, the creditor cannot pursue payment through the court system. Understanding the history of the statute of limitations on debt along with current regulation standards can help debtors handle their debts appropriately.
History of Debt LimitationsModern statutes regarding debt collection come from ancient Roman laws, including the Twelve Tables. The laws started to ease disputes regarding oral debt contracts that were tying up the court system and delaying proceedings regarding criminal matters. This system worked well for the Roman perception of property ownership and debt creation. English interpretation of Roman laws changed the definition of ownership to rely less on possession and more on contractual exchange between individuals. As a result, written contracts became the preferred way to handle business between two or more parties. The value placed on each type of contract varies from state to state, resulting in differing laws for each modern jurisdiction.
Current RegulationsWithout a time limit on old debt retrieval actions, creditors pass their clients’ accounts from collection agency to collection agency without an end in sight. All of those agencies file collection requests with the court, which often jams up the system, especially in busy jurisdictions. Each state developed their own code system with a certain number of years for oral and written contracts. With the exception of open accounts, the time limit starts counting down the moment the debtor defaults on the account. The debt timer countdown restarts each time debtors make a payment on the account, however. Most debt limits range from three to seven years, with several states on the extreme side of the spectrum. For example, Kentucky enables creditors to pursue written contracts for fifteen years. On the other side, oral contracts in California must be resolved within two years or the debt is forgiven at the end of that time span. States have the right to revisit the assigned statute of limitations on debt any time. Landmark court cases, in particular, have the power to influence state-level change of the debt laws. Unless the laws infringe on citizen rights, however, lawmakers do not usually challenge the code as it is written.
Statute of Limitations for Each State (in number of years)
|IL||5||10||10||5 or 10***|
** Georgia Court of Appeals came out with a decision on January 24, 2008 in Hill v. American Express that in Georgia the statute of limitations on a credit card is six years after the amount becomes due and payable.
*** An Illinois appeals court ruled on May 20, 2009, that the statute of limitations on a credit card debt without a written contract was 5 years.
**** State law doesn’t specify the limitations on open accounts.Source: bankrate.com