Past Due Debts In Your Business? Here's How The Debt Collection Statute of Limitations Can Limit Your Ability To Collect Your Debt.
The debt collection statute of limitations refers to the length of time collection agencies can continue to legally pursue past due debts. This effectively means that unpaid debts do have an expiration date, after which time debt collection agencies are no longer able to pursue for payment.
The time period for collecting a debt varies based on the individual states. Also, this debt collection time period should not be confused with the time limit for credit reporting, which is a distinct and separate issue.
Debt Recovery Statute Of Limitations Time Period
Bear in mind that the debt collection statute of limitations time period starts from the last date of reported activity on the account. This is the date that is shown on your credit report. Note also that this differs from the date that the account became overdue.
Activity on the account can include making a payment, making payment arrangements or agreements, or even the promise of a future payment can constitute account activity.
For example, should a customer elect to make a partial payment, this can effectively reset the time frame back to zero on the day payment is made. Debtors who intend to avoid paying their bills altogether may avoid making any contact whatsoever. These delinquent customers know that by letting the debt collection statute of limitations clock run out, then the window of opportunity for collecting the debt has passed.
How Can The Debt Collection Statute Of Limitations Help Business Owners?
Once business owners understand a little about how the debt collection statute of limitations can work, they can begin to use the rules in their own favor to help collection strategies.
Understanding that encouraging delinquent clients to make partial payments or even enter into payment agreements can begin the statute of limitations time frame over again from zero can be a way to increase the amount of time you have to collect overdue debts.
It can also be a way to force business owners into action. When it is understood that there is a time limit on the amount of time you have to sue for an unpaid debt, then you may consider reviewing your debt collection strategies or even contracting third party collection agencies to help you recover the debts sooner rather than later.
What Is Covered Under The Debt Collection Statute Of Limitations?
Debts such as child support, income taxes, or federal student loans are not covered under the debt collection statute of limitations, so they will continue to be owed regardless of the amount of time that has passed.
Most other types of unsecured credit contracts are covered. If you have any concerns or doubts about how the debt collection statute of limitations might impact your own debt collection efforts, then you might contact a collection agency, or an attorney, that can help you understand your rights.