Most people know that debts are subject to a statute of limitations and that, past a certain age, a creditor can’t sue you for the debt. This is more or less accurate: there are some “gotchas” that sometimes happen.
Certain kinds of debts never go away, like tax debts, criminal fines, and student loans.
The statute of limitations is set by the state in which the debt is incurred.
Different states set the statute of limitations differently.
Now someone asked me a really interesting question that I had never considered…
What happens when you incur a debt in one state with a short statute of limitations and later move to another state with a longer statute of limitations?
I was recently told by a debt collector that I had to pay a debt because it was still collectable in my new state. In my old state it had expired, but in my new state the debt would not expire for another 3 years or so.
I had never considered this possibility, perhaps because I had only ever moved between states with similar statutes of limitations on debt. However, intuitively this just didn’t pass the “sniff test.” This sounded way too convenient to me.
As I say, over and over again in my book Defeat Debt Collectors, collection agents are salesmen – they have financial motivation in getting you to pay, regardless of the facts. Their job is to “sell” you, the consumer, on the idea of paying off a delinquent account.
I did some quick research and found that, as a rule of thumb, the statute of limitations of the state in which the debt is incurred applies.
Now, it follows that:
- There is nothing stopping a debt collector from trying to collect on a debt. Is this kind of behavior a violation of the prohibition in the FDCPA against using deception to collect on a debt? Probably.
- If a debt collector really wants to sue you they will — the facts be damned. So it’s good to have a good consumer protection attorney on hand in case that happens.
See my next post for how I might handle a situation like this.
EDIT: a few people have asked for it so I thought it best to include a link to the statute of limitations on debt by state.