Ask Stacy: Do Unpaid Bills Ever Expire?

Here’s a recent question regarding how long you’re responsible for a bill.

Is there an expiration date for collection of a bill? I recently received a bill from 2006 and while I plan to pay, my husband and I were wondering if it is ever too late for a company to collect on a bill.
– Phyllis

The short answer to your question, Phyllis, is: No. Bills don’t expire. What does expire, however, is the legal remedy to collect them. In other words, while there’s no time limit when it comes to trying to get you to pay, there is a time limit for using a court to force you to pay.

How long can a company collect a debt?

Companies you owe can do lots of things to try to collect a debt. They can damage your credit score, send a collection agency after you, and sue you in court. But legal remedies don’t last forever. Nearly all transgressions in our society have a legal limit beyond which you can’t be successfully sued or convicted in court. It’s called the “statute of limitations.”

There are a few offenses not limited by statute – murder, for example – but most criminal and civil issues have a time limit. When it comes to debts, bills that can no longer be collected through the court system are called “time-barred.”

While there’s nothing barring a company from attempting to collect forever, statutes of limitation, unique to each state, establish the time when legal remedies expire. To find the statute of limitations in your state, check out this chart from About.com, or this one from CreditCards.com. You can also do a search for “statute of limitations on debt [your state].”

In Florida, for example, a creditor has four years to collect a debt for “open accounts” – the category that includes most bills, including credit card debt. After that time, no court can force a Florida resident to pay a credit card bill.

Note that the statute of limitations doesn’t prevent a creditor from calling you, sending you letters, or otherwise trying to get you to pay. In fact, this practice is quite common. Collection agencies and law firms routinely buy old debts for pennies on the dollar and attempt to collect. And they’ve been known to say or do just about anything to get you back on the hook.

Tread carefully

The laws regarding debt collection are tricky. For example, there are states that allow otherwise legally noncollectable debts to be reinstated if the consumer makes a payment – or even acknowledges the debt.

Keep in mind that after the statute of limitations expires, unless the debt has been charged off or discharged in bankruptcy, you still owe the money. In other words, the statute of limitations doesn’t wipe out the debt, it just eliminates the legal remedies available to collect it. So if you find yourself in this situation, and the bill in question is large enough to warrant it, the smart move is to call a consumer attorney (you can find one at the National Association of Consumer Advocates’ website) and ask them what to do.

Do this before responding to any collection notice or other contact from a collection agency. Otherwise, you might inadvertently make yourself liable for an otherwise time-barred debt.

Your credit report

What shows up on your credit report is determined by federal, not state, law. The credit reporting agencies (ExperianTransUnion, and Equifax) have to remove most negative information after seven years. Bankruptcies can remain on your report for up to 10 years, and there are some other, less common debts, like unpaid taxes and child support, that can remain on your report indefinitely.

The seven-year period normally begins 180 days after the debt becomes delinquent — the day you first missed a payment. But if you start once again making payments, the debt could reappear.

Here’s what to do

Since Phyllis is planning to pay her bill, she needn’t worry about any of this. But if you plan on not paying and using the statute of limitations as a defense, do more research. Start with the FTC’s page on time-barred debt.

But no matter how much you read and think you understand, I’d still advise at least talking to, if not hiring, an attorney. The more money at stake, the more important this becomes. Debt collection is a complex topic, and reading simple stuff online probably won’t answer all your questions or completely put you at ease. Talking to someone who does this for a living, however, will.

Use your payment to improve your credit history

If you agree to pay a delinquent bill that’s adversely affecting your credit history, don’t pay it without attempting to use your payment as leverage to have bad marks removed.

If you’re paying the creditor who originally reported the delinquency to credit reporting agencies, they have the ability to have the delinquent payments removed from your credit reports. Try to negotiate the removal of the bad marks in exchange for payment. If you’re successful, get it in writing before sending the money. This way you’ll get something additional for your payment: a better credit history and score.

For more on cleaning up your credit history, see “3 Steps to Fix Your Credit.”

Got a money-related question you’d like answered?

Drop me a line! Just try to make sure your question would be of interest to our other readers – don’t ask for personal or super-specific advice. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

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