What Is the Statute of Limitations on Debt?

If you owe money to a creditor for a credit card, loan, or other debt, and you default on that debt, the creditor has a limited amount of time to sue you. This is called the statute of limitations.

When Does the Statute of Limitations Period Start?

The time limit for a particular statute of limitations starts to run from the time that the agreement is breached. Usually that means:

• when you stop making payments
• cause insurance to lapse on collateral, or
• some other significant act or omission occurs that puts the ball back in the creditor's court to enforce the agreement.

Statutes of Limitations for Various Types of Debts

The amount of time a creditor has to sue you depends on the type of debt you have and your state law.

Written Contracts

Many states categorize the following as "written contracts" for the purpose of the statute of limitations:

• promissory notes
• credit card agreements (with exceptions, see below for more on this), or
• other written loan agreements.

Whatever your state's law sets as a statute of limitations for written contracts will usually apply to any written credit agreement with your creditor. For example, in Ohio, the statute of limitations to sue for breach of a written contract is eight years from the date of the breach. In New Hampshire, it is only three years.

Oral Agreements

If you made a promise to pay but did not put it in writing, or if a creditor claims that you owe money based on a verbal agreement, then most states will apply a different statute of limitations. The statutes of limitations for oral agreements are either shorter than the time limit for written contracts (most states) or the same time limit (all other states).

Open Accounts (Credit Cards)

Some states distinguish credit cards from standard "written contracts" and instead classify them as open-ended or revolving accounts. In those cases, the statute of limitations may be different. They are usually shorter than the time limits for written contracts. However, some states give creditors (especially credit card companies) the option of treating the credit account as a written contract, thus extending the statute of limitations even further.

For more information on open-ended accounts, see Nolo's article Time Barred Debts: When Creditors Cannot Sue You for Unpaid Debts.

Installment Contracts

If you enter into an installment payment agreement directly with a retailer, then a different statute of limitations may apply, depending on the state you live in. A retail installment agreement is different from a credit card in that the creditor is the store that sold you the goods, as opposed to a third party bank financing your purchase. You pay the purchase price directly to the seller over time. Usually, the statute of limitations, if applicable, is much shorter than the time limit for written contracts.

Mortgage Foreclosure

The time period within which a mortgage lender can foreclose on your home may be different than the time period for other written contracts. For example, in Ohio, banks are allowed up to 21 years to file a foreclosure action on a mortgage loan default.

Mortgage Loan Deficiency

If you owe a deficiency balance on a mortgage after foreclosure, the usual statute of limitations for enforcement of a deficiency judgment may be shortened. In some states, a mortgage lender cannot sue you at all for the deficiency owed on your home mortgage loan (Arizona, for example).

You can find the statutes of limitation for various types of contracts in each of the 50 states on Nolo.com. Check out Nolo's article Statutes of Limitation in all 50 States.

A Creditor May Sue You After the Statute of Limitations Period Has Run

Just because the statute of limitations has expired doesn't mean a creditor won't sue you. If it does sue you, you'll have to raise the statute of limitations as a defense. If you don't, the creditor may be able to get a judgment against you on an otherwise unenforceable debt.

Laws are constantly changing in this area. If you are sued, you should research your state's statutes of limitations or consult with a local attorney.