What is the statute of limitations on debt collection
Attorney Tom Olsen: Colonel, what is the statute of limitations on debt collection?
Attorney Colonel Airth: What it is, it is a written contract is five years from the date of the breach. A non-written contract is four years from the date of the breach but there is the date of the breach part that’s hard or at least can create issues. Like say for instance, you quit paying them on January 1st, 2010. Well you said yourself then, January 1st, 2015, five years later, the statute of limitations has run. Oftentimes just a little bit grey and the grey part is just because you didn’t pay them doesn’t mean they consider it breach. Oftentimes, as most people experience, you get another statement saying, hey, you’re a month behind. And then you get another statement saying, hey, you’re two months behind and now you owe use X number of dollars, take three times a minimum. Then suddenly you get a phone call and you get-- in other words they don’t claim that breach happened the day you last paid so you can’t be positive or absolute in saying they win a particular case defaulted. But these statutes limitations are five years from the date you did default and oftentimes you don’t know that until several years had gone by. Then you can argue-- I mean the defendant argues-- that these statute limitations started the first time you didn’t make the payment you’re obligated to make. Everyone makes a good argument.
Attorney Tom Olsen: Every once in a while I hear of a consumer that’s made a mistake in a sense that the statute of limitations had already run. They didn’t know that but they made another payment on that debt and that starts it running again.
Attorney Colonel Airth: It does and it’s very frustrating even if you pay $1. Then that recreates a whole cause of action again and you got another five years. You have to wait before it goes away. So if somebody’s hassling you, that’s often time, when you see these things. You’ll come in, you’ll get letters. Clients have gotten letters that say, “Okay, you owe us $3,500 but we will settle for X number of dollars but you need to send us $30 a month or something”. At first payment, boom, the whole debt becomes potentially liable again and if you haven’t gotten your deal done good. Then suddenly what you thought you were settling for something, you suddenly owe them all the money again. And so you have to be careful and don’t ever-- once you don’t pay, don’t pay until you make a deal with them. And the deal is they send you a letter that says if you pay us $250 we will accept it as payment in full and then you can write that check to them. On the check you write “Payment in full”. I always like to add, “Payment in full. Don’t cash unless accepted as payment in full.” And then that creates an obligation on their part that they know if they cash it, they’re settling their case and then you could get your defense later on.