Statute of Limitation laws are complex and very confusing.  The idea is that there is a limit of time after an “event” to take legal action. For example, in California,  if I drive my car through your living room, you have 3 years to sue me.  However, if I “accidently” punch you in the head, you have only 2 years to sue me. But what about debts? That’s why we are here after all.

Generally speaking, a creditor can no longer sue for a bad debt after 4years. But that does not prevent collection attempts. The creditor, after 4 years, can still try to collect on the debt, they just cannot sue you in a court of law. But the real tricky part is avoiding the creditor for those 4 years. And if you accept any type of responsibility for the debt during this time, the clock “resets” and the 4 years starts all over. So if during this time frame your get a collection call, be VERY careful what you say.

You have the right to remain silent, anything you say can be used against you in a court of law.

Sound familiar?

So when does this 4 year period start? I’m glad you asked. For the most part it is the date of the last “activity” on the account. This could be the last purchase date, or the last payment date. Or, if you were not paying attention to the previous paragraph, it could be the date of the last “acknowledgement” of the debt. The laws vary state to state, so as always, it is best to speak to a local attorney regarding the specifics.

I have heard on many, many occasions, that someone who is considering filing a bankruptcy may be close to the statute of limitations and does not need to file. But remember, the most important thing in a case like this, the statute of limitations only prevents a creditor from suing you in a court of law. The bills and phone calls (ohhhh……….the phone calls!) do not have to stop. They may continue to make your life miserable.

So, unless you are planning to go off “the grid” and live in a shack somewhere in the deep forest, the Statute of Limitations does not mean a whole lot.

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