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How does the Statute of Limitations (SOL) work?

Many people simply don't understand how Statute of Limitations on debt, so they pay off their creditors even when they don't have to just because they show up on their credit report. The fact is if the SOL on your open account has expired, in the eyes of the law you do not owe the money anymore. If your creditor has not attempted to sue to collect this debt in the allotted time, it is vacated under the U.S. Statute of Limitation on Debt laws.

Let's Calculate your SOL

It may seem to that the account in question is so old, so how do you really know if it falls into the parameters of the Statute of Limitations laws. You can figure out the answer with a few simple calculations. We will assume you stopped making payments on a written contract for a car loan in California, in January of 2004. Now let's:

1. Add six months to the last date you made any payment on the account

Ok we are at June of 2004 now.

2. Find your state on the chart below, match the type of account and add the years

California allows 6 years for written contracts so now we arrive at June of 2008. Do the math. If there have been no efforts by the creditor to collect this outstanding debt before June, 2008, you are in the clear and cannot be sued. Yes is sounds too good to be true. Keep in mind that this law affects the actual money you owe and the creditors' ability to sue you for it. It will not remove items off your credit report. You must use other methods of cleaning up your credit if you wish to remove these credit dings from your credit history.

Statute of Limitations Chart by State
(all numbers in Years)

State

Oral

Written

Promissory

Open-ended Accounts

State Statute: Open Accounts

 

AL

6

6

6

3

§6-2-37

 

AR

5

5

5

3

§16-56-105

 

AK

6

6

3

3

§09.10.053

 

AZ

3

6

6

3

§12-543

 

CA

2

4

4

4

§337

 

CO

6

6

6

3

§13-80-101

 

CT

3

6

6

3

§52-581

 

DE

3

3

3

4

§2-725

 

DC

3

3

3

3

§12-301

 

FL

4

5

5

4

§95.11

 

GA

4

6

6

6 **

§9-3-25

 

HI

6

6

6

6

HRS 657-1(4)

 

IA

5

10

5

5

§614.5

 

ID

4

5

5

4

§5-222

 

IL

5

10

10

5

735 ILCS 5/13-205

 

IN

6

10

10

6

§34-11-2

 

KS

3

6

5

3

§84-3-118

 

KY

5

15

15

5

§413.120

 

LA

10

10

10

3

§3-118

 

ME

6

6

6

6

§5-511

 

MD

3

3

6

3

§5-101

 

MA

6

6

6

6

c.260, §2

 

MI

6

6

6

6

§600.5807

 

MN

6

6

6

6

§541.05

 

MS

3

3

3

3

§15-1-29

 

MO

5

10

10

5

§516.120

 

MT

3

8

8

5

27-2-202

 

NC

3

3

5

3

§1-52(1)

 

ND

6

6

6

6

28-01-16

 

NE

4

5

5

4

§25-206

 

NH

3

3

6

3

382-A:3-118

 

NJ

6

6

6

3

25:1-5

 

NM

4

6

6

4

§37-1-4

 

NV

4

6

3

4

NRS 11.190

 

NY

6

6

6

6

§2-213

 

OH

6

15

15

6

§2305.07

 

OK

3

5

5

3

§12-3-95

 

OR

6

6

6

6

§12.080

 

PA

4

4

4

4

§5525

 

RI

10

5

6

4

§6A-2-725

 

SC

3

3

3

3

SEC 15-3-530

 

SD

6

6

6

6

§15-2-13

 

TN

6

6

6

3

28-3-105

 

TX

4

4

4

4

§16.004

 

UT

4

6

6

4

70-09a

 

VA

3

5

6

3

8.01-246

 

VT

6

6

5

3

§3-118

 

WA

3

6

6

3

RCW 4.16.080

 

WI

6

6

10

6

893.43

 

WV

5

10

6

5

§55-2-6

 

WY

8

10

10

8



An Oral Contract

An oral contract, while not the best contract you want to walk in to a courtroom with for obvious reasons, is still a contract and legally binding. These types of agreements are typically referred to as "hand-shake" agreements or non-written contracts.

Written Contracts

A written contract is just what it sounds like, and agreement to pay someone back that is written out in no uncertain terms and signed by both parties.

What are Promissory Notes?

The phrase "Promissory Notes" sounds a little misleading than what it really is. It sounds like a note you leave to borrow $20 off your parents for the movies when you're a kid. In reality Promissory Notes are the most common form of written contracts and are written to reflect exactly how much money is being loaned and how much interest will be paid. Mortgage or car loans are examples of Promissory Notes.

Open-ended or Revolving Accounts

These accounts do just as they promise; they remain open and active. The most common type of an open ended account is your credit cards. In fact, under U.S. law ANY credit card must be termed and open-ended account under the Truth in-Lending Act.



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