How Long Does A Creditor Have to Sue Me?

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How Long Does A Creditor Have to Sue Me?

Creditors who find debtors unresponsive to letters, phone calls, and other collection notices may turn to the court for a remedy. If a creditor files a lawsuit to collect an unpaid debt and wins a judgment against the debtor, the debtor’s wages or bank account could be garnished or property could be seized. Nonetheless, creditors and debt collectors have a limited amount of time to sue a debtor. The time period varies by state and is called the “statute of limitations.”  

Depending on your state and the type of debt, the statute of limitations usually ranges from three to six years and typically begins to run the moment you miss your first payment. Once the statute of limitations has run out, or “tolled,” a debtor has a defense to any lawsuit filed by a creditor for unpaid debts.  

For example, if the statute of limitations in your state is three years and you missed your first payment three years and one day ago, your creditor will face an uphill battle if it tries to sue you for the debt (as always, there are exceptions). However, it is important to note that in most states, the clock restarts whenever you make a payment on that debt. As such, even if the statute of limitations has passed, if you make a payment, the clock restarts and the creditor has another three years to sue you for the debt. 

What Happens When the Statute of Limitations Tolls?

There are three very important things to note once the statute of limitations has run out on your debt:

1. You Still Owe the Debt

Even though the statute of limitations may bar your creditor’s lawsuit, this does not absolve you from paying your debt. If you do have an old debt, consider reaching out to a debt settlement company for restructuring or renegotiating your payment terms. 

2. Your Creditors Might Sue you Anyway

The statute of limitations is a defense you can raise – but this doesn’t mean that a creditor won’t sue you anyway. It is up to the debtor to defend himself against a lawsuit, so if you are sued and you know the statute of limitations has passed (or you suspect it has), reach out to a lawyer immediately. You must still show up in court to present your defense and show that the statute of limitations has passed. If you don’t, you risk the court entering a judgment in favor of the creditor and your wages or bank account could be garnished.  

3. Creditors Might Still Contact you for Payment

Lastly, creditors and debt collectors can – and probably will – still contact you for payment on your debt. Some states limit their ability to do this, but it still does happen, because, as noted above, you do still owe the debt even after the statute of limitations has passed.  

If this happens, you can choose to either begin to repay the debt (but remember, the moment you make any payment on the debt the statute of limitations clock restarts), repay the debt in full, or continue to ignore the creditors. You can also write a letter to the creditor telling it the statute of limitations has passed and requesting that it cease contacting you.

 What About my Credit Report?

The statute of limitations only applies to lawsuits. How long unpaid debts, charge-offs, and defaults can appear on your credit report is entirely different. Most of these negative marks will remain on your credit report for seven years. This means that even if a statute of limitations on your debt is only three years, the negative mark related to that unpaid debt will appear on your credit report for an additional four years, potentially impacting your ability to get credit, rent an apartment, and more. 

Because the impact of debt goes beyond how long a creditor has to sue you for it, consider reaching out to a debt relief company to discuss your debt relief options.

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