Most people see debt as a burden — one they’d like to offload as soon as possible. But getting out of debt can be a slow process. After all, you can’t just put your life on pause and funnel every penny you make to debt relief; you still have to cover living expenses concurrently. It’s very common for debt to linger for years. At some point, you might find yourself wondering: Does debt expire?
While debt isn’t exactly like a carton of eggs in your refrigerator, it can “expire” so to speak. Let’s take a closer look at some statutes of limitations placed on unpaid debts.
How Long Can a Creditor Sue You?
There is a time limit on how long creditors have to sue you for an unpaid credit card debt. Once obligations surpass these limits, they’re known as time-barred debts. The exact length of time will vary in different places — certain states allow for longer collectible periods than others. Investopedia notes that these statutes of limitations can range from as low as three years to as high as 10 years. The Federal Trade Commission says most states impose a period between three and six years, after which debts become time-barred.
You’re no longer legally obligated to pay time-barred debts. However, collectors may still contact you about them. Avoid acknowledging the debt at all, particularly if the statute of limitations has run out. Why? Because acknowledging you technically owe the debt will restart the clock. And even if you find yourself feeling guilty about an old time-barred debt, repaying it after the statute of limitations will put that money into the pocket of a third-party collection agency rather than the original creditor.
Now, after learning about time-barred debt, you may be wondering: Why doesn’t everyone just wait until their statute of limitations has ended? The answer is because sometimes that will mean years of ongoing damage to your credit score, which ultimately makes it much harder to gain solid financial footing and accomplish your goals. Furthermore, there’s a thriving business around this “stale debt” within which collectors buy and sell old debts for pennies on the dollar. The only foolproof way to eliminate a debt is to “pay what you owe or at least an agreed upon part of what you owe.”
This demonstrates why it’s usually worthwhile to address outstanding debts, even if they’re years old by now. There are a few ways to go about doing so. Some people decide to work toward settling with collectors through negotiation — as evidenced by Freedom Debt Relief reviews, many people have been able to reach an agreement with their collectors in which they’re able to close out an account for less than what they originally owed. For substantial debts, Chapter 7 or Chapter 13 bankruptcy may be the only option.
How Long Do Unpaid Debts Show Up on Your Credit Report?
It’s important to note, however, the statute of limitations is different than the amount of time debts can stay on your credit report. Typically, negative credit events will remain on your report for seven years — which may provide compelling motivation to pay even time-barred debts if it’ll save your credit score from further damage.
The consequences of poor credit can manifest themselves sneakily in other areas of your life — like higher insurance premiums, higher interest rates on loans and a harder time getting approved to rent or buy a home.
There is a statute of limitations on unpaid debt, legally speaking. But credit damage can last for seven years, which often means it’s smart to come up with a plan to pay down old debts regardless.