You May Not Have to Pay Some of Your Old Debts

A term that you may have heard on your basic cop show is something called a statute of limitations. What works on cop shows works in financial life as well. Each state has a statute of limitations on money that you owe for some kinds of debts. If you stop paying on those debts, after that period of time, which varies from state to state, you can no longer be sued by your creditor to get money from you.

The Statute of Limitations is Not an Excuse to Avoid Paying
This is not a free ride, you should be a responsible person and intend to pay any bill that you have. If you have the money to pay it, go ahead and do it, even if you think that the person or the company that you owe the money to is greedy, evil, or unworthy. The bottom line is that a deal is a deal.

What Kinds of Debts Have a Statute of Limitations?
Depending on your state, the statute of limitations rules depend on the kind of agreement you have. Basic kinds of agreements include:

- Oral Contract: This is a verbal or handshake agreement to pay back money loaned to you.

- Written Contract: You agree to pay a debt or loan under the terms written down in a document signed by you and your debtor.

- Promissory Note: This is a written loan payment agreement with scheduled payments and interest on the loan spelled out in the promissory note. A mortgage are one type of promissory note.

- Open-ended Accounts: These are revolving lines of credit with varying balances and sometimes varying limits and interest rates. Credit cards are one kind of revolving account.

Statute of Limitations and Credit Cards
If you stop making credit card payments for whatever reason, the credit card company can sue you for payment. The statute of limitations starts is the date of your last payment. For example, if your last payment was on September 11, 2001, and the statute of limitation in your state for credit card debt is 10 years, your credit card company has until September 11, 2011 to sue you to recover the unpaid credit card balance.

What Is the Statue of Limitations In Your State?
That information is described in state laws, and you can go to any public library and find that kind of information out for the kind of debt you owe. If your situation is complicated, contact a credit counselor or even a lawyer to figure out your situation. Please note that the initial consultation with these kinds of professionals is usually free. Also, there may be nonprofit or community based organizations that that can help you get the information for free.

Other Things to Consider
Your situation will be different for each debt. For example, an unpaid debt may stay on your credit report long after the statute of limitations has passed. For some kinds of debts such as mortgages or car loans, the company that you owe may take other actions like foreclosure or repossession long before the statute of limitations runs out. Also, a sneaky debt collector may lie to you and say that the statute of limitations does not apply to you. When in doubt, contact someone who can give you expert advice about your situation.


Please note: That some states consider credit card agreements to be an oral contract,other states consider it a written contract, and some states have specific laws pertaining to credit card lawsuits. If you have unpaid credit card debt and are concerned about your legal rights, a lawyer can brief you on the specific laws for your state.