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 Recovery Statute Of Limitations Time Period

It should be noted that the debt collection statute of limitations time period begins from the date of the last reported activity on the account. This is the date that is indicated on your credit report. Keep in mind that this date differs from the date the account originally 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.

This also means that a customer who makes one partial payment can restart the time frame again from zero on the day the payment is made. For customers who intend to avoid paying bills, then there is the option of avoiding making any contact whatsoever. These unscrupulous delinquent customers are aware that by allowing the debt collection statute of limitations time period to elapse, then the window of opportunity to sue for payment of the debt has passed.

How Can The Debt Collection Statute Of Limitations Help 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.

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 such as child support, income taxes, or federal student loans are not covered under the debt collection statute of limitations, so they will continue to be owed regardless of the amount of time that has passed.

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.