The debt collection statute of limitations refers to the window of time that collection agencies can continue to legally pursue delinquent, unpaid debts. This basically means that unpaid debts have an expiration date, after which collection agencies have to stop with their collections activities.

The period of time that may elapse for collecting a debt differs from state to state, but it shouldnt be confused with the credit reporting time limit. These are distinctly separate and different 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 instance, if a customer makes one partial payment, this can reset the time period back to zero on the day the payment is made. Customers intending to ignore paying their bills altogether can avoid making any contact at all. These delinquent debtors know that by allowing the debt collection statute of limitations clock to lapse, then the possibility for collecting the debt has passed because of the missed opportunity window.

How Can The Debt Collection Statute Of Limitations Assist Business Owners?

Once business owners come to understand how the debt collection statute of limitations works, they can then use these laws to their advantage and help in their debt collection efforts.

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.

It can also be a way to force business owners into action. When it is understood that there is a time limit on the amount of time you have to sue for an unpaid debt, then you may consider reviewing your debt collection strategies or even contracting third party collection agencies to help you recover the debts sooner rather than later.

What Is Included Under The Debt Collection Statute Of Limitations?

Excluded debts not covered under the debt collection statute of limitations include federal and state income taxes, child support, and federal student loans. Regardless of the amount of time that has passed, there is no expiration date to prevent collecting these types of accounts.

Most other types of unsecured credit contracts are covered. If you have any concerns or doubts about how the debt collection statute of limitations might impact your own debt collection efforts, then you might contact a collection agency, or an attorney, that can help you understand your rights.