The statute of limitations refers to the amount of time dictated by law after which any legal proceedings can no longer be initiated. As far as debt is concerned, it pertains to the limit to the time when lawsuits could be filed against you for settling your old debts. The purpose of statute of limitations on debt is to offer protection for consumers from legal actions on old debts.

After the expiration of the statute of limitations, the debt will be deemed time-barred, which means that the collector will no longer be able to file lawsuits against you. However, it doesn’t necessarily mean that your debt will now be removed from your record. Your debt will continue to be your liability and the only difference is that no one can sue you.

The statute of limitations doesn’t govern credit bureaus. The debt can continue to reflect on your credit record for up to 7 years starting from the debt when your debt initially went into arrears and wasn’t updated afterward.

The statute of limitations on debt differs from one state to the next, with an average time that ranges from 3 to 6 years.

Importance of Statute of Limitations on Debt

If you haven’t paid your debt, your creditors are given the right to file a case against you for repayment. This is the reason why debtors must be wary about collecting on debt prior to the statute of limitations coming into effect.

Up until the 30^th of November 2021, most collectors would file lawsuits despite the expiration of the statute of limitation. If there is no response from the debtor, most judges would rule in favor of the collector even after the expiration of the statute of limitations.

The practice is currently considered illegal. The sweeping reform of practices on debt collection, Regulation F, took effect on the 30^th of November 2021. Among its provisions is that collectors are no longer allowed to threaten suit or sue over a debt after the expiration of the statute of limitations.

These days, you can no longer be imprisoned if you fail to pay consumer debt. In spite of this, some people still face and even serve jail time because of unpaid debts.

The Statute of Limitations on Debt and Your Credit Score

It is different from the credit reporting time. This means that even after the expiration of the statute of limitations, your unpaid debt will still remain on all of your credit reports from the three major credit bureaus.

The typical period for reporting unpaid debt and late payments is 7 years although there are some instances when this timeframe may vary. If you think that there is no longer a need to report your debt, but it continues to show up on your credit report, it is important to get in touch with the credit bureau and ask for a correction.

If you have several debts and you wish to prioritize your payments, debts close to passing the statute of limitation or those that are already passed it should be placed at the bottom of your list even when you have plans to pay them.