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.
The time limit for a particular statute of limitations starts to run from the time that the agreement is breached. Usually that means:
The amount of time a creditor has to sue you depends on the type of debt you have and your state law.
Many states categorize the following as "written contracts" for the purpose of the statute of limitations:
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.
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).
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.
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.
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.
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.
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.
Need professional help? Start here.