The debt collection statute of limitations refers to the length of time collection agencies can continue to legally pursue past due debts. This effectively means that unpaid debts do have an expiration date, after which time debt collection agencies are no longer able to pursue for payment.
This time period for collecting a debt varies from state to state, and it shouldn’t be confused with the time limit for credit reporting. These are separate and distinct issues.
Debt Collection Statute Of Limitations Time Period
Bear in mind that the debt collection statute of limitations time period starts from the last date of reported activity on the account. This is the date that is shown on your credit report. Note also that this differs from the date that the account became overdue.
Activity on the account can include making a payment, making payment arrangements or agreements, or even the promise of a future payment can constitute account activity.
For example, should a customer elect to make a partial payment, this can effectively reset the time frame back to zero on the day payment is made. Debtors who intend to avoid paying their bills altogether may avoid making any contact whatsoever. These delinquent customers know that by letting the debt collection statute of limitations clock run out, then the window of opportunity for collecting the debt has passed.
How Can The Debt Collection Statute Of Limitations Help Businesses?
When business owners understand how the debt collection statute of limitations works, they can start to use these rules to their advantage and help in their debt collection strategies.
Knowing that by encouraging past due customers to enter into payment arrangements and/or make partial payments can restart the statute of limitations time clock over again can be a tool to increase the amount of time you have to collect past due debts.
This can prove to be a catalyst for business owners to take action and rethink their delinquent accounts. When it is known that you have a limited time period to collect unpaid debts, you may review and reconsider your debt collection strategies. You might even opt to hire an outside collection agency to help with recouping your debts sooner rather than later.
What Is Covered by The Debt Collection Statute Of Limitations?
Debts that are excluded under the debt collection statute of limitations include child support, federal student loans, and federal and state income taxes. There is no expiration date that prevent collecting these types of accounts.
Many other kinds of unsecured credit agreements are covered under the statutes. However, if you have questions about how the debt collection statute of limitations may affect your debt collection efforts, you should contact a collection agency, or your attorney, who can help you understand your rights.