When does a debt get too old to collect?

Waiting for the statute of limitations to pass is risky

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also wrote for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs.

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Question for the CreditCards.com expert

Dear To Her Credit,
I am getting sued by a creditor. The account is about six or seven years old. Can the creditor collect money after all of this time? I live in Minnesota. -- Jasmine

Answer for the CreditCards.com expert

Dear Jasmine,
In Minnesota, the statute of limitations is six years, so at first glance it would seem that a six- or seven-year-old debt is uncollectible. (See our map for the statutes of limitations in other states.) Before you decide you're safe, however, you need to consider a few other factors.

The first factor to determine is which state laws dictate the statute of limitations for this debt. Although you live in Minnesota, the fine print on your contract may say that the contract is bound by the statute of limitations laws from the state of the issuer. Even if that's not the case, if you've moved, the laws of the state you lived in when you took out the debt may apply. It makes a big difference -- the number of years in statutes of limitations laws vary from just a few years to over seven years, depending on the state.

Next, you need to know the starting date of the statute of limitations -- the window of time during which creditors may collect. For example, say you opened an account in January 2005, made payments until December 2006 and then stopped. The statute of limitations period does not start until the account is delinquent, which would be sometime in 2007. (The exact date it begins depends on state law.) In that case, the statute of limitations would not be up until 2013, despite the fact that the account is seven years old in January 2012.

Be careful not to unintentionally restart the statute of limitations time period. Have you ever wondered why a collector begs you to send any amount of money, no matter how ridiculously small, to apply to a debt? He's trying to get you to restart the debt clock and acknowledge the debt as yours. You can just as easily restart the time period by admitting the debt is yours, agreeing to payments (with or without making any payments) or making a new charge on the account.

If your debt is close to the statute of limitations, but not quite there, you can still be successfully sued for payment. You will have to make a deal with the creditor or face garnishment of your income.

If a creditor takes you to court and you believe the account is past the statute of limitations, you can respond in court with proof that the debt is too old to collect. If this is a significant debt, I recommend you get legal counsel from someone familiar with the laws in your state.

One more thing to consider: If the debt is legitimate, why not pay it off? The statute of limitations laws are designed to keep creditors from popping up and claiming people owe money from the distant past -- so long ago that no one can remember exactly what happened or prove anything one way or another. Some people get the idea that all they have to do is sit tight until the statute of limitations passes, and then they don't have to pay. If you really owe the money and can afford to pay it, you should.

Remember that when a bill becomes too old to collect, it doesn't drop off your credit history. It can stay there for seven years, lowering your score and making your financial life more difficult all around. A paid-in-full debt always looks better on your credit history than an unpaid one, no matter how long it took to pay it off.

See related: State statutes of limitation for credit card debt, Avoid restarting the clock on time-barred debt

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Updated: 01-21-2018