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You’re so deep in debt you don’t see a way out. You’re considering bankruptcy, but you’ve heard it’s not as easy as it used to be. Can’t you just change your phone number, dodge creditors, and wait until the debt goes away? If you’re considering this scenario, you may have heard of something called a “statute of limitations” on debt. A statute of limitations is a time limit within which a corporation or individual can sue another corporation or individual. So, the statute of limitations on your debt is the amount of time that your creditors can bring you to court to collect on your unpaid debts.
The statute of limitations varies by state and ranges from three years to 10 years. But it’s not so easy as just waiting until the statute of limitations runs out in your state (or moving to a state with a shorter statute of limitations) and then enjoying a debt-free life. Here’s why:
What the Statute of Limitations Really Means
The statute of limitations is merely the amount of time a creditor has to bring you to court to sue you for the money you owe. Creditors and debt collection agencies can use any other tactic to try to collect on the debt for as long as they want. Today’s debt collection agencies pull out all stops to find people who owe money. You can move and change your phone number, but they can still hunt you down through family, friends, co-workers and even social media. Nothing short of changing your identity illegally can keep creditors from harassing you for unpaid debts.
Additionally, even though “time-barred debts” (debts that exceed the statute of limitations) cannot be collected in court, that doesn’t stop debt collectors from attempting to sue you. You may still have to appear in court and show the judge that the debt has passed the statute of limitations.
Be Careful of Re-Setting the Statute of Limitations
If you make a payment on an old debt which is nearing its statute of limitations date, you could re-set the clock. This is one reason debt collectors may get more persistent the longer you’ve had the debt. They want to buy more time to collect that money.
Living in Fear is No Way to Live
Brave souls may be able to wait out the statute of limitations, dodge debt collectors and then re-build their credit without paying off old debts. But living in fear of collection agencies catching up with you is no way to live. Consider other, more practical solutions to paying down your debt, or talk to a personal finance lawyer about bankruptcy if you don’t see another way out.