Diamonds are forever, goes the sales pitch.

If you’ve got bills you can’t pay, it may seem that debt is forever as well.

Not so.  Every debt owed to a creditor who isn’t a governmental entity has a statute of limitations.  That’s the point beyond which a creditor can’t use the law to take money from you.

Far more people can tell you how long a debt can remain on your credit report than can tell you how long a court will help the creditor collect.

The statute of limitations has nothing to do with whether the debt was real.  It simply says that, at some point, all things must pass.  Debt has a life span.  Once it reaches the end of its legal life, you win any lawsuit brought to enforce the debt.

You’ve got to invoke the Woody Allen Rule to win, however.  Allen asserts that 80% of life is showing up.    To win a collection lawsuit when the debt is beyond the statute of limitations, you have to show up,  file an answer in writing and raise that defense.

Put another way:  snooze, you lose.

Finding the statute of limitations

Statutes of limitations are creatures of state law.  Nolo Press has a chart showing the life span of debts in each state and the place in the law where the statute is found.

Generally, the statute that applies is the one in the state where you live or the state where you signed the contract that created the debt.

Calculating the life of debt

You start counting on the statute of limitations from the last activity on the debt.  That could be the last purchase on a credit card, or the last payment on the account.

If you make a partial payment on a long dormant debt, you run the risk of resetting the statute:  the debt may get new life, because there is now new activity.  That’s one of the reasons that debt collectors are so anxious that you make a payment, any payment.

Limits to limitations

Statutes of limitations don’t keep creditors from using methods other than lawsuits to collect the debt .  In fact, the statute of limitations doesn’t prevent the collector from suing.  It just assures that you win if they try to sue.

So debt collectors can continue legally to call and write in an attempt to get you to pay.  That’s zombie debt at work.

So, before you pull out your checkbook to pay on old, old debt, check out the statute of limitations.  That debt may be legally dead.

The FTC summarizes the law on time-barred debts.

Image courtesy of Wikimedia.org

_{»crosslinked«}