There is a time limit that a debt collector can sue you to collect on outstanding debt. The time limit depends on the state you live in and what type of debt it is. There is a table at the end of the article with each state’s statute of limitations.

there is a legal time limit a debt collector can sue you to collect on a debt

how to build your credit score
When there is an unpaid credit obligation, creditors and debt collectors can only sue you for a set period. How long that period relies on the legal time limit in the state where the obligation started. Legal time limits are statutes of limitations laws that dictate the cutoff times on a creditor, or debt collector can sue you for the outstanding debt. That does not mean that this item can’t be reported on your credit report. Even if you are outside of the time limit, it can be reported on your credit report and hurt your credit score. This can prevent you from being approved for a mortgage. Lenders may see you as not being creditworthy for such a large amount when you have an outstanding collection reporting on your credit report.

there are four types of debt covered under the statute of limitations

The time limit for each type of debt may be different. Listed below is a brief description of the four types of debt.

Oral Agreements

This type of agreement is not in writing. An oral arrangement happens when you borrow money from somebody and agree to pay it back at a specific time. This type of agreement is often called the handshake agreement. Lenders do not use this type of agreement. They are hard to prove when nothing is in writing. This type of agreement is often used when lending money to friends and family..

Written Contracts

They record the details of lending agreements. A written contract will state how much was borrowed, the date it was borrowed, the reason for the loan, the interest that will be charged, when the payments are due, and how much the payments will be, and other terms of the loan. Both the borrower and the lender have to sign the contract for it to be binding.
Unlike oral agreements, written contracts are easier to prove. Auto loans are written contracts. Services that you agree to in writing and medical debts are also examples of written contracts.

Promissory Notes

Have less detail than a written contract, but they are also written. The lender does not have to sign a promissory note, only the borrower. Examples of a promissory note are mortgage and student loans.

Open-Ended Accounts

This type of account is open for an indefinite period. The account will usually stay open for as long as you want to keep it open if you make your payments on time. An example of an open-ended account is a credit card or line of credit.

Listed below is the Statues of Limitations by State

This list is for informational purposes only. Contact your state Attorney General’s office or a legal professional for current information.

when does the statute of limitations start on an account?​

The statute of limitations begins when you miss your first payment. Each time a payment is made, the statute of limitations resets. If a debt collector calls you on a debt that is almost past the statute of limitations and you make a payment, you will reset the statute of limitations.

credit reporting on delinquent accounts​

Most of your negative accounts will be removed from your credit report after 7 years. The date of removal is the date of first delinquency on the account. In many of the states listed above, the debt will be past the statute of limitations and will no longer be collectible, but the negative account will still be reporting on your credit report.

what are your options with delinquent account with an outstanding balance?​

  • Contact the creditor and negotiate the payment. They may accept less than the balance due. The item will be marked that the account was settled for less than the balance. This option does not look that good to potential lenders.
  • Contact the creditor to pay the debt in full. This method looks better to lenders.
  • Wait for 7 years for most items to come off your credit report.

contact whatcom credit restoration​

If you have questions about collection accounts reporting on your credit file, give us a call at 360-312-7164. We offer a complimentary credit consultation.

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