Statute of Limitations On Unsecured Debts

QUESTION: I understand there is a statue of limitation of 4 years to collect unsecure debt (say, credit card debt). The creditor sold the debt to a collection agency at the end of the 4th year of the debt. My question is would the clock reset on this debt account? I meant a 4 years statue of limitation starts all over again with the new collection agency? what if this collection agency now sold the debt to the second collection agency after number of years unsuccessfully to collect, and the circle repeats itself. What rights as a consumer of unsecure debt has to get this old debt off the record for good?

ANSWER: It sounds like your question relates to credit reporting more than potential lawsuits to collect the debt.
The clock for the statute of limitations on debt starts at the date of default. (Some creditors like to argue the clock starts from the date of chargeoff – -180 days after default.) Unless YOU make a payment, nothing else will restart that clock.
The statute of limitations to collect the debt in court is 4 years.
The amount of time that the debt will appear on your credit report is 7 years from the date of default. It makes no difference how many times the debt was bought and sold, it is still seven years. If you make a payment to any debt collector or debt buyer along the way, then the clock starts all over again.

This information is provided for educational purposes only. There is no attorney-client relationship with Karni Law Firm until a contract is signed by the attorney and the client.


Arrest Threats? Because you defaulted on that auto loan years back?

The statute of limitations on most debt is 4 years after the date of default under Texas law.  When attempting to calculate this date, one would go back to the date of last payment on the account, count 30 days and that would be the default date.  The original creditor or any third-party to whom they may have sold the account has 4 years from the date of default to sue on the debt.  This is the first thing that you must consider when being contacted on an old debt.

If you do not pay, the creditor or debt buyer can file a civil lawsuit against you.  If the debt is past the 4 year statute of limitations, you might be able to avoid a judgment.

Unfortunately, some consumers are unable to pay.  The creditor or bill collector might use harsh collection tactics to try to collect, especially if the debt is too old for a legitimate lawsuit.

Collector:  Ma’am, you have owed this debt for 4 years now,  I realize your husband is away working and you are alone with the kids, but if you don’t pay this debt… I’ll have you arrested, your children will go into foster care and you’ll never see them again, do you want that to happen?

^ This actually happened to a lady in Houston, Texas.  This is a serious violation of the FDCPA and the collection agency that was responsible for this ending up having to pay this woman and her attorney for all the mental and emotional anguish they caused her.

If a debt collector has been threating arrest due to your non-payment of a debt, contact a consumer attorney at .