Having a substantial amount of debt looming over you can put a damper on any situation. You may have the ability to forget about your outstanding balances for a time, but they likely jump to the forefront of your mind when it comes to making a purchase, especially on something that is not strictly necessary.
What you may not know, however, is that there are statutes of limitations on the amount of time a creditor has to take you to court in attempts to collect a debt. After that time frame has closed, the creditor cannot take you to court to receive payment. However, it is also important to know that you could reset the statute of limitations, even unintentionally.
What is the statute of limitations?
The exact amount of time for statutes of limitations on debts varies from state to state and depends on the type of agreement that led to the debt. The types of agreements include the following:
- Written contracts, which each party signs and which includes the terms of the loan
- Open-ended accounts, such as credit cards and other lines of credit
- Oral agreements, which involve verbal discussion and acceptance of loan terms
- Promissory notes, such as mortgage loans that include interest rates, dates of repayment and payment details
In Wisconsin, the statutes of limitations on these types of debts is six years for oral agreements, six years for written agreements, 10 years for promissory notes and six years for open-ended accounts. You may want to keep in mind that the court does not keep up with statutes of limitations for debts. As a result, if a creditor attempts to take you to court over a debt that has already exceeded the prescribed amount of time, you would have to prove that the time has passed.
Are you off the hook?
Though statutes of limitations can prevent a court judgment coming against you concerning certain debt, it does not mean that the debt is no longer an issue. If you decide to make a payment on outstanding debt, the statute of limitations resets at the time of that payment. Additionally, the creditor could still pursue you in attempts to gain payment but cannot go to court to do so.
Because you could still face negative repercussions relating to old debts, you may want to consider your options for getting back on track financially. Discussing your circumstances with a bankruptcy attorney could allow you to better understand statutes of limitations and your options for handling your debt.