As you may know, a statute of limitations is the timeframe during which a lawsuit or criminal charges can legally be brought against you, in this case for offenses that necessitate the repayment of debt. Such actions can still be initiated once the statute runs its course and your debt becomes “time barred,” but using the age of your debt as a defense will result in the case being dismissed from court. In other words, the statute of limitations is something that an indebted consumer must be aware of in order to strategically manage amounts owed.
We all have a number of recurring monthly expenses, not to mention intermittent charges like parking and speeding tickets, for which a failure to pay could conceivably result in a debt collector coming to recoup amounts owed. Below you will find a discussion of the statutes of limitations for debt resulting from the following types of debt:
|Loans & Lines of Credit||Taxes & Government Fines
|Credit Cards||Federal Income Taxes||Utilities|
|Student Loans||State Income Taxes||Cell Phone Bills|
|Mortgages||Traffic Violations||Medical Bills|
Loans & Lines of Credit
In recent years, we’ve become very familiar with the statute of limitations for credit card debt, as the Great Recession caused many of us to fall behind on payments. The terms of your relationship with a credit card company are dictated by a written credit card agreement, which means the SOL for written contracts applies to any resulting debt. The SOL for written contracts ranges from 3-15 years, depending on the state, and resets if you make a payment. In some states, simply signing a document acknowledging that you owe money or agreeing to pay your debt will also reset the SOL.
Please visit the Statute of Limitations for Credit Card Debt page on our sister site Card Hub to find the specific timeframes that pertain to your situation as well as a more detailed discussion about credit card debt.
The Higher Education Technical Amendments of 1991 eliminated the statute of limitations for federal student loans (previously 6 years). Lawsuits and collection measures can therefore be initiated at any point in time.
The laws are different for private student loans. The payment of private student loans is typically dictated by promissory notes, which are governed in all states (with the exception of New York) by Article 3 of the 1990 Uniform Commercial Code. While this statute requires that actions to collect unpaid debts be commenced within 6 years of the due date, there are state and federal consumer protection laws that prohibit most types of consumer debt from being embodied in a promissory note. In other words, lenders and debt collectors will likely have to consider student loans as written contracts when trying to collect. The SOL for written contracts varies by state from 3 to 15 years. It begins to run when the breach of contract occurs and resets whenever you make a payment. In some states, the SOL will also start anew if you agree in writing to make a payment or that you owe money in the first place.
As you know, a mortgage is secured by the value of the home it is used to purchase. In other words, if you fall behind on your mortgage payments, a bank can foreclose and sell your home to recoup amounts owed. If the delinquent payments exceed the remaining value of the property in question, a requirement to pay this remaining debt, known as a deficiency judgment, will be issued. The amount of time lenders have to commence foreclosure proceedings and act on deficiency judgments varies by state.
Like mortgages, auto loans are secured by property (i.e. the vehicles they’re used to buy). The most likely collection remedy in the event of a default is therefore repossession of your vehicle. If the amount you owe exceeds the value of the vehicle upon repossession and sale, the lender or debt collector may use alternative collection methods such as a lawsuit. They may contend that the debt originates from either a written contract or a promissory note, depending on which has a more favorable statute of limitations, but certain state and federal consumer protection laws prohibit most types of consumer debt from being governed by promissory notes, so it’s perhaps more likely that the statute of limitations for written contracts will be used. The SOL for written contracts varies from 3-15 years, depending on the state, and begins accruing upon breach of contract (i.e. a missed payment). It resets each time you make a payment (in certain states it also resets if you agree in writing to make a payment or that you owe money).
The statute of limitations for personal loans depends on how you entered into the loan. If you made an oral agreement with a friend, for example, the SOL for oral contracts will apply. This varies by state from 2-15 years. Otherwise, the SOL for written contracts will likely apply. It ranges from 3-15 years, depending on the state, and resets each time you make a payment.
Taxes & Government Fines
First of all, the IRS generally has up to three years from the date you file your tax return or are required to file your tax return, whichever is later, to assess additional tax liabilities (i.e. audit you). There are, however, two exceptions to this rule: 1) If you underestimate your gross income by more than 25%, the government has up to six years to assess additional amounts owed; and 2) There is no time limit to assess additional taxes due if you either don’t file a return or file a fraudulent return.
The SOL for the collection of unpaid debt is 10 years from the date the final amount due is assessed. You can determine this date by checking your taxpayer account transcript, which can be ordered for free by filling out IRS Form 4506-T.
The SOL for federal income taxes can be suspended or reset if you:
- Sign an agreement to extend the SOL – The IRS will often request that you do so as part of an installment payment plan that would extend beyond the normal statute of limitations.
- Make an offer in compromise – The SOL will be suspended while the IRS considers your offer and will begin to run again if the offer is rejected.
- Enter bankruptcy - The SOL does not run during bankruptcy proceedings.
States generally follow the IRS’ three year rule for assessing added tax liabilities, though there are certain exceptions. More specifically, the following states do not adhere to this rule:
- Arizona, California, Colorado, Kentucky, Michigan, Ohio, and Wisconsin have four years from the date you file your return or the date it is due, whichever is later, to assess additional obligations.
- Kansas has three years from the date your return was due, the date you file, or the date you pay, whichever is later.
- Louisiana and New Mexico have three years from December 31 of the year your taxes are due.
- Minnesota has three-and-a-half from the filing date or the due date, whichever is later.
- Montana has five years from the filing date or the due date, whichever is later.
- Oregon has three years from the filing date.
- Tennessee has three years from the filing date or the due date, whichever is later, unless you claim a refund (in which case it’s three-and-a-half years) or the IRS changes your federal return (in which case it’s five years).
To make matters even more complicated, the SOL for the collection of unpaid state taxes varies by state, which you can see from the table below:
|State||Statute of Limitations||State||Statute of Limitations|
|Alabama||10 Years||Montana||5 Years|
|Alaska||N/A, no state income tax||Nebraska||3 years (A statutory lien arises upon tax assessment; if a Notice of State Tax Lien is recorded during that time, it lasts for 10 years and can be renewed for additional 10-year periods indefinitely).|
|Arizona||- 10 years (lawsuit)
- None (property lien)
|Nevada||N/A, no state income tax|
|Arkansas||None||New Hampshire||12 years*|
|California||20 Years||New Jersey||**|
|Colorado||6 Years||New Mexico||**|
|Delaware||10 Years||North Carolina||10 Years|
|District of Columbia||**||North Dakota||**|
|Florida||N/A, no state income tax||Ohio||None|
|Georgia||7 years (State has 7 years from final assessment to issue a lien, but liens can be added in 7 year increments until a citizen’s death)||Oklahoma||10 years (This time period dictates by when a lien must be placed or a suit must be brought; delinquent taxes can be subtracted from owed tax refunds for perpetuity)|
|Illinois||20 Years||Rhode Island||None|
|Indiana||6 Years||South Carolina||10 years (property lien)
None (levy issued before lien in place 10 years)
|Iowa||- 3 years (if return was filed)
- 10 years (if no return was filed)
|South Dakota||N/A, no state income tax|
|Kansas||10 years (property lien)||Tennessee||6 Years|
|Kentucky||10 Years||Texas||N/A, no state income tax|
|Louisiana||**||Utah||3 years (A lien must be placed within three years following a tax assessment; lien then expires after 10 years)|
|Maine||None (property lien)||Vermont||**|
|Maryland||- 7 years (general timeframe for comptroller to recoup debts)
- None (property lien)
|Virginia||7 years (collection must initially be done within a seven-year period, but liens can be renewed for 20 additional years).|
|Massachusetts||**||Washington||N/A, no state income tax|
|Michigan||6 Years||West Virginia||10 years (collection actions must be brought within this timeframe, but liens can remain in place forever)|
|Minnesota||- 5 years (standard collections processes)
- 10 years (property lien)
|Mississippi||**||Wyoming||N/A, no state income tax|
|Missouri||- 5 years (lawsuit)
- 20 years (tax lien)
*This state does not have a personal income tax, but it does tax the interest from bonds and notes as well as the dividends from stocks.
**We are currently in the process of obtaining information from this particular state.
Most often, traffic violators are given citations, which are basically charging documents that either advise you of your right to a hearing in traffic court or act as a court summons. If you don’t show up or the judge rules against you, a fine will be imposed. This technically constitutes prosecution of the case, meaning it’s finalized under the law’s eyes, the fine must be paid, and any statute of limitations is inapplicable (i.e. you’ll never be off the hook for payment).
However, certain states (e.g. Georgia) classify all traffic violations as criminal offenses. In such states, you could use the statute of limitations for the respective misdemeanor or felony as a defense, but since you’ll have already been charged (i.e. given a ticket), the SOL likely will not have much of an impact on your case.
Utility services (i.e. gas, electric, and water) are based on written contracts, which means the SOL for written contracts applies to past-due utility payments. This is the same SOL that applies to credit card debt.
The SOL for written contracts – like credit card, utility, medical, and cell phone agreements – will always reset if you make a payment. In many states it will also reset if you:
- Acknowledge in writing that you owe money
- Agree in writing to make a payment
- Waive in writing your right to stop a debt collector’s suit
Cell phone service is based on a written contract between you and your provider, which means the same SOL that applies to credit card debt and past-due utility payments also applies to unpaid cell phone bills.
The forms that you sign when at the doctor’s office generally include fine print that says something along the lines of, “I understand that I am financially responsible for all charges whether or not paid by said insurance. I agree to assume responsibility for all charges incurred should collection of this balance become necessary including court costs and attorney’s fees.” In other words, they usually constitute written contracts that dictate legal liability for payment, and the statute of limitations for written contracts therefore applies.