What is the Statute of Limitations on Debt in My State?

The Amount of Time You Have to Collect Depends on Where the Debt Was Incurred

When someone owes you money, the moral obligation to pay continues to exist until it is paid in full. (After all, a deal is a deal.) But the legal obligation can be a different story.

The amount of time you have to litigate (sue a person or business in a court of law) can range from 2 to 15 years depending on a variety of factors, mainly:

1. The U.S. state in which the transaction took place; and
2. The type of agreement. Do you have a written contract with terms and conditions (like a signed Statement of Work) a promissory note (like a mortgage or student loan), and open-ended account (a credit card or line of credit) — or a handshake based on an oral (spoken) deal? In some states, the type of agreement and the documented proof you have in hand makes a huge difference.

Statute-Barred or Time-Barred Debt

When a debt has exceeded the jurisdictional state’s statute of limitation, it is referred to as “statute-barred” or “time-barred” debt. It doesn’t mean the debt is no longer owed (it is) or that it can no longer impact the debtor’s credit score (it can). It simply means that the credit grantor can no longer obtain a court judgment to enforce it. Without the help of a collection agency, recovering old, statute-barred debt can be nearly impossible for most businesses in the United States.

Statutes of Limitation on Debt by US State

Here are the Statutes of Limitations (in years) for each of the 50 states, as of this writing.

Even if a debt owed to you has aged beyond the statute of limitations period and is time-barred, there is a good chance you can still collect on it. A good US collection agency reports files it takes on to the credit bureaus (Equifax, Experian and TransUnion), impacting the debtor’s credit score until the amount is paid in full, provided you have proof that the debt is valid. Oral contracts—which are especially hard to enforce at any point in time—are out of luck, but written and properly documented debt may still have a chance.

It Shouldn’t Ever Come to This

One last important thought: as a business owner or AR manager, you should NEVER let debt get anywhere near the statutory limitation for your state. The statistical recoverability of debt is in constant decline from the billing date forward (see the debt recoverability chart).

As a rule of thumb, if you cannot collect a debt or account within 90 days of the due date, get professional help. Your customer is in breach of contract, and you are at financial risk. Use the services of MetCredit USA or another reputable collection agency—just don’t delay taking action. The majority of new US companies don’t stay in business long enough to reach statutory limitations, especially those that struggle to pay creditors in accordance with their agreements!

Looking for the Statutes of Limitations on debt in Canada? Here they are in all Canadian provinces and territories.

Disclaimer: this article is for information and reference purposes only and is not intended to provide legal advice. Consult with an attorney for help and information relevant to your specific situation.