Debt collection is a fascinating subject. It has so many facets that trying to explain the details of every single case is impossible. Take statutes of limitation. They apply in some debt collection scenarios but not in others. Moreover, statutes of limitation can vary quite a bit from one state to the next.
If you’re interested in fully understanding just how complex the statute of limitations questioned can be, check out this post from the Consumer Financial Protection Bureau (CFPB). By the time you get to the end of the post you’ll probably be just as confused as most other consumers.
Statutes of Limitation: The Basics
As we attempt to make this topic at least somewhat understandable, let’s start with the basics of the statute of limitations. A statute of limitations can apply in both criminal and civil court. Statutes of limitation relating to debt collection cases dictate the amount of time a debt collector has to collect on an outstanding debt using certain legal tools.
Similarly, a statute of limitations in criminal court would establish a set amount of time prosecutors have to bring charges against a defendant. Once the statute of limitations is reached, no charges can be brought.
Debts Have No Limitations
With the basics out of the way, it must be understood that debts have no limitations. As the CFPB explains, legitimate debts remain outstanding until they are paid. A debt incurred 50 years ago is still valid today if the party responsible for it has not paid it in full.
On the other hand, most states have statutes of limitation relating to how a debt can be collected. Collection agencies have access to certain legal tools that aid them in their collection efforts. Those tools can only be used until the statute of limitations has been reached – usually 3-5 years. After that, the tools are off limits. The debt is still valid, and the creditor can still attempt to collect through other means.
When Judgments Are in Play
Statutes of limitation are a bit different when judgments are in play. Consider the fact that creditors can choose to collect from debtors through standard means or by going to civil court. If a creditor chooses court, winning the case results in a judgment being entered against the debtor. That judgment gives the creditor access to enhanced collection tools.
Just like most states have statutes of limitation on general debt collection, they have similar statutes of limitation on judgments. The average statute is 7-10 years. Here’s what that means in simple English: a judgment creditor has 7-10 years to collect the outstanding judgment.
Going to civil court offers the added advantage of being able to renew judgments prior to their expiration. Though the details vary from state to state, most states allow at least one renewal. Some states allow perpetual renewals. In theory, that means a judgment could remain in force for decades.
A Judgment Is More Serious
Judgment Collectors, a collection agency based in Salt Lake City, Utah, says that judgments are more serious because of the legal tools that come with them. They say a judgment gives creditors access to wage and bank account garnishment, property seizure, and other tools that simply can’t be used by creditors without a judgment.
I make this distinction to note the fact that a statute of limitations is meaningless on a judgment if the creditor renews prior to expiration. If a creditor wants to continue pursuing a judgment, they can. That’s just one of the ways judgments differ from general debt collection.
