| March 13, 2017

Increasing the Statute of Limitations on Debt

Arizona just increased their statute. Will other states be soon to follow?

If you’re one of those people who is hiding from a debt collector in the hopes the statute of limitations will expire, don’t move to Arizona. The Arizona Court of Appeals recently changed the statute of limitations on credit card debt collections. The new statute is not good for consumers who think they can give creditors the slip.

Credit cards are typically considered “open accounts.” In Arizona the statute of limitations for open accounts is three years. That’s fairly relaxed compared to statutes in other states.


Data source: Bankrate

However, now the Arizona Court of Appeals made an exception for credit card debt and doubled the statute of limitations. So instead of taking three years to expire it takes six.

That’s still not the highest statute in the country. And in fact, by federal law the statute of limitations for open account is capped at 15 years. Most states stop well short of that. But as Arizona has just shown, those statutes can change and leave past-due credit users in a bad spot.

The question of when the clock starts

As the article points out, one of the most problematic parts of these statutes is determining when the clock starts and ends on a particular debt. Some people think the clock starts when the first payment is missed. Others think it’s when the debt passes to the collector. But then what happens if the debt is re-sold?

In most states, a creditor has a legal right to sue you once you miss a single payment. That means the clock to collect starts as soon as the ability to sue becomes viable.

However, the Arizona courts, at least, have made a clear declaration to the contrary:

“A credit card holder’s “failure to make [a] minimum monthly payment credit-card payment does not trigger the statute of limitations” but the credit card lender must accelerate the debt (demand payment for the full balance owed) in order for the statute of limitations to begin.”

In plain speak that means that the statute of limitations doesn’t begin until the creditor seeks payment in full on the total balance. Essentially, that’s when the creditor or a collector calls you to tell you that you owe X amount.

But that may create an issue if the creditor does not attempt to contact you immediately. The collector can effectively control the clock on the statute of limitations by controlling when it starts. At the same time, the debt might still be accruing interest charges and penalties.

You can use credit counseling to address challenges with collections

“Trying to avoid a debt collector until the clock on the statute of limitations runs out is not easy,” says Gary Herman, President of Consolidated Credit. “Regulations like these make it even harder. So you need to find a solution rather than trying to avoid the situation. Credit counseling is one option that can get the collectors off your back.”

Credit counseling has the potential to stop collection actions because you establish a clear plan to repay your debt. You also enlist the help of the credit counseling agency that acts on your behalf when it comes to negotiating with collectors and creditors. The agency negotiates with each creditor (or collector) individually to get them to agree that each debt can be included in the program. As a result, the collection calls stop and the debt gets repaid as part of your debt management program.

If you have unpaid debt that have passed to a third-party collector, we can help. Call Consolidated Credit today at to request a free debt and budget analysis from a certified credit counselor. You can also complete an online application to request help now.

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