Most debtors are unaware that a statue of limitations exists for debts. A statute of limitations is a set time period after which creditors can no longer collect on a debt – the debt is said to be stale. Each state has its own time period and it can range from three to six years. While it is an integral part of the consumer protection system, most people don’t realize how important if could be.
The tricky part to a statute of limitations is trying to identify the actual start date. Generally speaking, it is set at the date of the last payment. However, creditors often try to get around this by selling the debt to another party thus trying to reset that start date. The new debt owner will often try to resell it again as the statute of limitations date draws close. For debtors, the original date is the important date no matter how many times that debt has been sold.
As a debtor who may be considering bankruptcy, you need to be aware of this statute of limitations for a number of reasons. First, you may be able to use this legal aspect to negate a debt and avoid having to go through bankruptcy. A second reason for being aware of this statute is that, unless you claim it, it will not be enforced. In other words, the courts will not look at a debt and label it stale unless you request it. Failing to request the enforcement of the statute of limitations will generally result in the court accepting the creditor’s claim – this includes non-bankruptcy debt collection court orders.
If you have debts that are old and for which you have not made any payments for several years, consult a bankruptcy attorney. The statute of limitations may prove to be the ideal remedy for one or more of these debts and may help you avoid the bankruptcy process altogether.
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