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If you ever wondered whether or not there is a statute of limitations (SOL) on debts, the short answer is “yes.” Unfortunately, this short answer can be misleading as almost all the fifty states have different statutes of limitations on different kinds of debts. For example, in Texas, the statute of limitations on written contracts, oral agreements, promissory notes and open-ended accounts is the same – four years. But in Arizona, it’s 6, 3, 5 and 5 years respectively. And in Indiana, it’s 10 years on written contracts, 6 on oral agreements, 10 on promissory notes and 6 years on open-ended accounts.
What is a statute of limitations?
A statute of limitations is a period of years after which a creditor can no longer sue you to collect on your debt. Its purpose is to safeguard you from the worry of being sued by a creditor forever. However, this does not prevent a creditor from suing you. If a creditor does file suit, you can request that the case is dismissed on the grounds of “expired time.” You should also know that the SOL does not pertain to certain types of debt such as many types of fines, Federal Student loans, and child support that’s past due (depending on the state).
It can be complicated
The SOL can be a bit difficult to calculate, as it is not always calculated from the last date you made a payment. Instead, it is generally measured by what’s called evidence of indebtedness or the date you defaulted on the account, and whichever came the latest. Suppose your account was current when you made your last payment. In this case, SOL would be four years from the date you defaulted and this might be 30 days later. Or it could be four years after the return date, as this would establish evidence of indebtedness.
A payday loan can be illegal
If you've gotten caught in the clutches of a payday lender, there's at least some good news. Payday loans (PDLs) from unlicensed lenders may be illegal in your state. This means any payday loans taken out with one of these lenders are also illegal.
What to do
The way payday loans generally work is that you give the lender permission to take money directly out of your checking account. So, the first thing you will want to do is talk to your bank. You can sit down with a personal banker or relationship manager (not a teller) and let him or her know that you're rescinding ACH authorization for all your PDL's, and that you will supply the bank with a copy of your letter revoking ACH authorization. Make it clear that you want to protect your account before any more money can be withdrawn. If you have overpaid on the loan’s principal, you can fill out fraud paperwork. You will need to explain that you have overpaid on the loan but that the lender refuses to stop deducting money from your account. If you still owe money to a lender (or lenders), be certain that you tell the bank that you learned this type of loan is illegal in your state and you need to be protected from the lender’s ability to access your account.
Close the account
You might also want to tell your banker that you'd like to keep your business with the bank and ask it to close your account and open a new one for you.
A better solution
While the statute of limitations can keep you from being sued over a debt it can’t stop creditors from harassing you during all those years. This means a better solution might be to pay off those debts, including PDL's, through debt relief or debt settlement. You can learn how debt relief could help you by filling out the free debt analysis form you will find on our home page.