If your debt is past the Statute of Limitations a collection agency or creditor can still sue you in civil court as an attempt to obtain a judgment.  So why does the Statute of Limitations (SOL) exist and how can you use it towards your defense?  If you have any questions pertaining to this article please leave a comment at the end of this page.  See also, Debt Prison related article Sample Debt Validation Letter.

**Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.

A statute of limitations (pertaining to debt) is a statute in our legal system that sets forth the maximum period of time, after certain events (default on payments), that legal proceedings based on those events may be initiated.  The SOL for defaulted debt will vary state by state which you can look up by clicking here.  The SOL can vary wildly… in New York it’s 6 years but in Ohio it’s 15 years (sucks to be in Ohio). The date on which you miss your first payment starts the clock on the SOL.  For example, in Texas the SOL for defaulted debts is four years.  So if you miss your first payment on August 30, 2008 – your creditor has until August 30, 2012 to file suit and still be within the SOL.  So why would a collection agency or creditor file suit on defaulted debt after the SOL has expired?

You need to show up in court to defend yourself

Though the debt may be past the SOL… someone needs to show up in court and explain that to the judge.  That someone should be you.  So if your debt is past the SOL and you get served a summons for a civil suit from a collection agency – just make sure you walk into court on the assigned day and explain to the judge why the debt is past the SOL.  The judge will then dismiss the case.  It would be a good idea to take any paperwork into court with you to help support your defense.

If you fail to show up in court and defend yourself the collection agency will likely win a default judgment.  So you want to make sure you show up in court to prevent the default judgment.  Also, it would be a good idea to converse with the collection agency and try and convince them to drop the suit before the court date.  Since their appearing in court and having their case dismissed would be a complete waste of their time…. not to mention yours.  Sometimes it’s worth a phone conversation to convince the plaintiff that their case won’t stand up in court and therefore should be dropped.

Can the collection agency still sell my debt to another agency?

Selling debt is becoming a world wide industry.  Junk debt buyers are buying up debts on which the SOL has expired and even debt that was absolved due to bankrtupcy.  Why would a company buy such debt?  Because many people will become intimidated and pay the debt.  Most people simply don’t know their rights.

But can’t the clock on the SOL get reset?

Yes…. the clock on the Statute of Limitations can be reset by a couple of different circumstances.  First, if you make any payment (no matter how small) on the defaulted debt the clock on the SOL will be reset.  So in Texas the collection agency would then have a fresh four years to drag you into court to obtain a judgment.  Also, in some states if you acknowledge, over the telephone, that you owe the debt or that you will try and make a payment – the SOL just got reset!  So be careful what you say over the phone.

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I recently received the following question from a reader in response to a collection agency reviving a dormant judgment.

Hey DP,

I just received a motion from a collection agency to revive a dormant judgment. They are seeking $7,000 and 10% interest. I have never even heard of the agency. They sent the court documents to the wrong address and used my maiden name. The court hearing is Nov. 21th. What advice do you have?

Jane

Hey Jane,

Sorry to hear about this. It sounds like you are saying you had a debt many years ago that went to court. The court ruled in favor of your creditor and gave a judgment declaring that you owe the money and need to pay it. Maybe you didn’t pay it, some time has elapsed, and now a new collection agency is trying to collect on the judgment. Am I right so far?

I don’t know if a judgment expires. And I don’t know if the statute of limitations applies or not in this case (because of the judgment). Either way I would first try and call the courthouse and talk with a clerk or judge. You want to appear extremely cooperative and sorry that you haven’t satisfied the judgment. Also, you could ask the court if a payment plan can be worked out between you and the collection agency.

Also, this collection agency probably owns the legal rights to the debt… However, you need to make sure that the collection agency is legit and that you actually have to pay THEM. For example, was $7,000 the amount of the old judgment… or is this the first time you’ve heard of the $7,000?

I would go to court and defend myself against the collection agency either way. I would explain that you haven’t satisfied this old judgment because of certain reasons .. x,y, and z. And I would explain to the judge that you have the $7,000 to satisfy this debt right now or you don’t. If you don’t then you need to ask nicely about a payment plan or something along those lines that can fit into your monthly budget.

But mainly, be nice and cooperative. Courts don’t look kindly on people who ignore judgments. Keep that in mind as you handle this matter.

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