How long can you collect a debt?

The statute of limitations on a debt is a fairly misunderstood term, and its meaning can confuse even the most-experienced creditors. The most-oft heard number given to me is “seven years”, but what does that mean exactly?

The statute of limitations on a debt has to do with the expiration of certain remedies the creditor has to collect the debt, is set and enforced by each individual state, can vary depending on the type of debt or the manner of the debt’s incursion, and may not always end the debts existence.  In Oregon for example, a contractual debt’s SOL is six years from date of last payment or date of last charge, whichever is later.  But that ends the creditor’s rights to file a lawsuit, not terminate the debt itself.  However, a judgment in Oregon can be collectible for up to 20 years, and after that the debt “sunsets” and is no longer owed.

And where do we get “seven years” in our head?  From the federal law; the Fair Credit Reporting Act (FCRA).  This law governs the reporting time to the credit bureaus, not the individual state’s SOL.  The credit reporting isn’t exactly 7 years, but usually rounded off to that length, and starts with the date of delinquency.  Credit reporting terms do not affect the SOL for filing a lawsuit.  For example, in Oregon a debt for a consumer rental debt is only 12 months, but the account can be reported for the entire length of the FCRA allowance, even though a creditor cannot file suit after 12 months.

In California, a debt can have a different SOL depending on oral vs. written.  Municipal and governement debts often don’t have a SOL.  Where was the debt incurred?  What type of debt is it?  Is it  written or verbal?  Your debt may still exist past the SOL, but a creditor’s remedy to file suit may have expired.  When in doubt, get good legal counsel!  I have seen a number of creditors we turned away telling them the SOL had expired and we would not accept the account for collection, only to see them take it to court and get counter-sue for violating unfair trade laws.  Know the SOL for your debt, know your remedy, and adhere to the laws that govern your debt.

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