What is the statute of limitations and how it affects your rights to collect a debt?

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The debt collection statute of limitations refers to the length of time that collection agencies can continue to legally pursue unpaid debts. This means that unpaid debts have an expiration date, after which collection agencies have to stop with their collections activities.

The period of time that may elapse for collecting a debt varies from state to state, but it should not be confused with the credit reporting time limit. These are distinctly separate and distinct issues.

Debt Recovery Statute Of Limitations Time Period

Remember that the debt collection statute of limitations time period starts from the last reported date of 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.

Account activity can include making a payment, entering a payment arrangement or agreement, and even promising to make a payment.

For example, should a customer elect to make a partial payment, this can effectively reset the time frame back to zero on the day payment is made. Debtors who intend to avoid paying their bills altogether may avoid making any contact whatsoever. These delinquent customers know that by letting the debt collection statute of limitations clock run out, then the window of opportunity for collecting the debt has passed.

How Can The Debt Collection Statute Of Limitations Assist Business Owners?

When business owners understand how the debt collection statute of limitations works, they can start to use these rules to their advantage and help in their debt collection strategies.

Learning how to encouraging late paying customers to make partial payments, payment arrangements or enter into a payment agreement can restart the statute of limitations time clock over again can be a great tool to lengthen the amount of time you have to collect these past due delinquent accounts.

This can also force business owners to rethink their past due debts and take action. When you know that you have a limited window of time in order to collect an unpaid debt, you might reconsider your debt collection efforts. You may even decide to outsource to third party collection agencies to help you recoup your debts sooner rather than later.

What Is Included Under 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.

However, most other types of credit agreements are covered.  If you're in any doubt about how the debt collection statue of limitations may affect your own debt collection strategies then it's important that you contact third party collection agencies to help you navigate through your rights.