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Statute of Limitations on Debt

Did you know that there is a legal limit to the number of years that a creditor has the legal right to sue you?

Whether it’s credit card debt or medical bills, that debt becomes “time-barred” if the statute of limitations has passed. Creditors can still attempt to collect the debt by the usual means, but legally, you cannot be sued. The debt does, however, stay on the record for all future creditors to see. One of things this can do is cause you to have to pay higher rates of interest on any lines of credit you may attain. Laws in the state where you live, even if the initial debt originated elsewhere, usually determine the statute of limitations on your debt. However, some creditors create clauses and put them into their agreements that say a specific state’s laws will be adhered to no matter where a customer lives.

Trying to determine whether or not a debt is past the statue of limitation may require the aid of an attorney or some other legal advisor. A private attorney can help you figure things out much faster, but it will come with a higher price tag. The state’s attorney general’s office can offer advice to you for free, but they can be hard to make contact with them. Finally, you can often find local legal aid, also a free service, but attorneys who work for legal aid often have calendars that are overbooked, leaving them overworked and hard to see.

You can also speak directly to the creditor when you are trying to gain information about the debt that can help determine whether the statute of limitations has past. You must be careful speak with them, because they can take several words or actions by you to mean that you have accepted the debt and picked it back up. You only need to ask your creditor two questions if you already know the basics such as amounts and payments that you have already made. Those questions are: “Is this debt time-barred?” and “What was the date of the last payment?”.

They do not, by law, have to give you an answer as to whether or not your debt is time-barred, but if they do, they have to give an honest and truthful answer, in accordance with the Fair Debt Collection Practices Act. If they choose not to answer the question, it can be helpful to know that the clock starts on the statute of limitations about thirty days after your first missed payment. If you have made no payments, the time then starts when the debt was incurred or marked delinquent, depending on the state in which you live.

In the state of California, the statute of limitations is four years on all forms of debt except those incurred by means of an oral contract, in which the statute of limitations is only two years. This means that on any unsecured common debt, such as that from credit cards, cannot be collected after four years has passed.

Three different events can cause the statute of limitations clock to start in the state of California: the due date of the payment you missed, the date of your last purchase (for credit cards) or the date of your last payment.

If your credit card company should agree to give you additional time in which to make a payment, this can stop that clock. For instance, if your payment is due by the last day of January, the company can give you until the end of April to make a payment. At that point, the clock will not start running until after the April date has passed.

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