Statutes Of LimitationThe Consumer's Friends

Besides the seven-year clock, you as a consumer also have access to the statute of limitations in your state for open-ended or open accounts.

An open account is a credit card loan for the majority of consumers. This statute has established the maximum number of years a lender has to sue you if you do not pay him the outstanding amount. It is not unusual to read of consumers busily paying off their collection and charge-off debts, because they appeared on their credit reports, or because a collection agency was keeping tabs on their credit report, and the minute it showed any activity, the collection agent shot out another letter asking for payment. In a majority of cases, there was no need to pay these debts because the statue of limitations had already expired.

The time-limit on the statue of limitation differs in each state. However, in most states the statute of limitations is restricted to 3 to 6 years for open accounts. Statutes on written contracts also expire in the same period.

Do bear in mind, however, that this statute does not make your debts vanish into thin air. Your lenders may still sue you. But you now have a defense. Whenever a lender sues you, you must prove to the court that the statute of limitations has already expired. This is your sure-fire defense.

In order to find when your statute of limitation took effect, simply examine your credit report for the last activity on your account. The date mentioned there is your original clock. This is your reference.

If you know for certain that the statute has expired, then you should immediately get in touch with your lender or collection agency and inform them of the fact. Write the following letter, and send it by certified mail:

Date:
YOUR FULL NAME
YOUR ADDRESS
CITY, STATE, ZIP

Lender's/Collector's Name
Address
City, State, Zip

Dear (get the appropriate person's name who is handling your file):

RE: MY OPEN ACCOUNT (Give full details of the account, such as: Name of lender, amount, etc.)

This is to notify you and state that the statute of limitations has expired on my open account, details for which are given above.

Would you please send a written response confirming this expiration.

Sincerely,
Your Name
Your Signature

If you send this letter, you will be prepared for all eventualities. Whenever a lender chooses to sue you, you can produce this letter as evidence, along with your credit report, which will very clearly state the date of last activity. Both these documents are your hard defense. This is why it is important that you send a certified letter, so the court can know that you did indeed send such a letter.

Another thing to keep in mind is that if you decide to pay the collector, you might still hear from the lender, who might inform you that the statute of limitation has been postponed because you made a deal with a collector. To counter this argument, make sure you fully understand where you stand if you pay the collection agency. Ask them to supply you with a letter from the lender which states that upon payment from you, the statute of limitation is still in effect.

As well, if you file bankruptcy, and at the same time the statute of limitations expires, then the lender automatically loses the right to make a claim in bankruptcy court. Again, the law will protect you fully.

One last point, if the lender made you sign a "promise to pay" note, you do have the right not to fulfill the "promise", even though the statute of limitation is still valid and in force.

Below is a state-by-state listing of the Statue of Limitations. Consult it to plan your approach.