What Is a Time-Barred Debt and How Should You Handle It?

A time-barred debt is one where the creditor missed the legal deadline to sue you. Debt collectors may still contact you about these old debts. But you have rights and options.

Understanding statute of limitations laws helps you protect yourself from unfair collection attempts.

What Is the Statute of Limitations for Debt Collection?

Statutes of limitations are state laws that limit how long creditors can sue you. These time limits vary by state and debt type.

When the statute expires, the debt becomes time-barred. Creditors and collectors cannot sue you to collect that debt.

The statute only applies to lawsuits. Collectors can still attempt to collect time-barred debts. They just cannot take you to court.

You still technically owe the money. But you can ignore collection calls without fear of legal action. Better yet, tell them to stop contacting you in writing.

If someone sues you for a time-barred debt, you have a powerful defense. Our partner Solo can help you respond to the lawsuit and raise this defense in court.

What Is a Statute of Limitations Defense in a Debt Lawsuit?

Courts do not automatically dismiss lawsuits for time-barred debts. You must respond and raise the statute of limitations as a defense.

Your response needs to tell the court the statute has expired. You may also need to appear in court and inform the judge.

When you properly raise this defense, the judge should dismiss the case.

Why Do Statutes of Limitations for Debt Exist?

Statutes of limitations encourage creditors to act without unnecessary delay. They provide peace of mind by removing endless lawsuit uncertainty.

The statute only applies to lawsuits. It does not affect how long debt appears on your credit report.

Negative information usually stays on your credit report for seven years. The statute of limitations and credit reporting period are separate issues.

Which State’s Statute of Limitations Applies to Your Case?

Statutes of limitations differ by state. You need to know which state’s laws govern your debt.

Usually, your debt follows the laws of the state where you live.

Sometimes your debt agreement specifies different state laws. Look for a “choice of laws” provision in your contract.

Statutes of Limitations Vary by Contract Type

Different debt types have different time limits. Once you identify your state, determine which statute applies.

Consider these common statute types:

• Written contract statutes usually have the longest time frame
• Unwritten contract statutes are typically shorter
• Open account or credit line statutes may be shortest

Credit cards start as written contracts. But each new charge has no written agreement. Some states treat these as unwritten contracts.

When Does the Statute of Limitations Start?

After identifying the applicable time period, determine when it begins. Start dates vary by state and should appear in your state’s statute.

Common start dates include:

• The date of the last charge on the account
• The date you signed the contract
• The date the account first became delinquent
• The date you made the last payment

What Should You Do If Contacted About a Time-Barred Debt?

Debt collectors may still contact you about time-barred debts. Credit card debt collectors are especially persistent.

Follow these steps if contacted:

• Ask the debt collector about the statute of limitations
• Verify the debt details
• Do not make any payment

Ask When the Statute of Limitations Expires

The Fair Debt Collection Practices Act (FDCPA) requires collectors to answer truthfully. Ask them when the statute of limitations expires under applicable state law.

Some states offer stronger protections. California requires debt collectors to tell you if a debt is time-barred. They must include this notice in the first written communication after the statute expires.

Verify and Validate the Debt

Any debt collector contacting you must provide certain information. Federal law requires this disclosure.

Required information includes:

• The name of the creditor
• The amount owed
• A statement that you may dispute the debt
• A statement that you may request the original creditor’s name and address

Never Make a Payment on the Debt

Do not make any payment on a time-barred debt. Payments may revive zombie debts and restart the statute of limitations.

A zombie debt is an old debt that should be uncollectible. Making a payment puts you back on the hook for the full balance.

Before admitting you owe anything, send a debt verification letter. Ask about the original creditor, debt amount, and dispute options.

Get Legal Help if Needed

Some debt collectors pursue time-barred debts until paid in full. They hope you do not know your rights.

Sometimes the collector does not even know the statute has expired. Debt changes hands many times and records get lost.

An attorney can help if collectors repeatedly contact you about time-barred debts. Our partner Solo specializes in helping people respond to debt collection lawsuits.

Check Your Credit Report

Review your credit report carefully after being contacted. Creditors often report time-barred debt as recent information.

Reporting old debt as new may violate the Fair Credit Reporting Act (FCRA). You can dispute this violation.

You can get your credit report for free. Dispute any inaccurate information on your report. Removing inaccurate information boosts your credit score.

How Should You Handle a Time-Barred Debt Lawsuit?

The statute of limitations only applies to lawsuits. After expiration, you still legally owe the debt.

Collectors may still try to collect using other means. Three states are exceptions: Mississippi, Wisconsin, and North Carolina.

In those three states, your repayment obligation ends when the statute expires. Residents no longer owe the debt after that date.

Use the Statute of Limitations as a Defense

In all other states, you must raise the statute as a defense. If you do not respond, the collector could obtain a judgment against you.

Raising the statute of limitations should result in case dismissal. You have other legal remedies against parties collecting time-barred debts.

If you received a bankruptcy discharge, you may be able to sue for violation of the discharge injunction.

Know Your Rights Under the FDCPA

The Fair Debt Collection Practices Act provides important remedies. The FDCPA requires collection agencies to stop contacting you upon written request.

What Is the Fair Debt Collection Practices Act?

Original creditors may send unpaid debts to collections. They may also charge off and sell debts to third-party debt buyers.

Debt buyers purchase past-due debts and try to collect them. They often ignore the age of the debt.

The FDCPA is a federal law that limits third-party debt collector actions. Under the FDCPA, debt collectors include collection agencies, debt buyers, and collection lawyers.

The FDCPA applies to consumer debts. These include credit card debt, personal loans, and medical debt.

The law does not apply to original lenders or creditors. It also does not cover business debts.

The Federal Trade Commission (FTC) enforces the FDCPA. The Consumer Financial Protection Bureau (CFPB) assists with enforcement.

Summary

Statutes of limitations set time limits for debt collection lawsuits. These statutes vary by state and debt type.

Debt collectors often attempt to collect time-barred debts. Knowing your FDCPA rights protects you from unfair practices.

Know the statute of limitations for your state and debt type. Respond carefully if contacted about potentially time-barred debts.

Always request a debt validation letter. Never make even a partial payment until you verify the debt is valid and collectible.