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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

Keep in mind that the debt collection statute of limitations time period commences from the date of the last reported activity on the account. This date is shown on your credit report. This is a completely different date from the date the account became overdue.

Activity on the account includes making a payment, entering a payment agreement or even making a promise of a payment.

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 Help Business Owners?

Once business owners understand a little about how the debt collection statute of limitations can work, they can begin to use the rules in their own favor to help collection strategies.

Understanding that encouraging delinquent clients to make partial payments or even enter into payment agreements can begin the statute of limitations time frame over again from zero can be a way to increase the amount of time you have to collect overdue 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.

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.