The Pennsylvania Statute of Limitations on Debt Collection
Did you know that in PA, your creditors have only a certain amount of time to try to collect a past-due debt from you? Your creditors are not legally permitted to pursue you forever for debt.
Find out from an experienced Philadelphia bankruptcy lawyer how long your creditors have to try to collect debts from you, when the statute of limitations begins and how it gets restarted, what debts fall under PA’s statute of limitations, what to do when the statute of limitations runs out and creditors try to collect from you, and how to solve your debt problems during and after the statute of limitations.
What the Statute of Limitations on Debt in PA Is
For most types of debt, creditors have four years in Pennsylvania to sue you for unpaid debt.
What does the PA statute of limitations on debt (42 Pa. C.S. 5525(a)) do for you? It prevents creditors from filing a collection lawsuit once the statute of limitations runs out.
When the Statute of Limitations Begins
The PA statute of limitations on debt begins to run on the day the debt comes due. That day is usually established by your contract with the creditor.
For example, if your car loan retail installment contract includes a provision that failure to make two monthly payments in a row constitutes default, then the day after the last day you could have made the second payment on time will be the day the statute begins to run.
Resetting the Statute of Limitations
You can reset the statute of limitations by making a payment, making a partial payment, or negotiating for a new payment plan with the creditor.
Do You Need to Pay After the Statute of Limitations Runs Out?
For most debt, no. However, for some debt such as federal student loans, federal income tax, and PA state tax, there is no limit to the time the government has to sue you to collect that debt.
Which Debts the Statute of Limitations Applies To
The types of debt the PA statute of limitations governs are:
- Mortgage debt
- Car debt
- Credit card debt
- Medical debt
- Private student loan debt
- Promissory notes
- Oral contracts
- Deficiency balances on mortgage or car loan accounts, when the collateral has been surrendered, repossessed, or foreclosed
- Unpaid second mortgages following foreclosure and sheriff’s sale
The Statute of Limitations for unpaid second mortgages following foreclosure runs from on that debt runs from the date of the last payment made on the second mortgage, not from the date of the sale.
Be forewarned – if a promissory note was signed under seal, the lender may argue that the 20-year statute of limitations on documents under seal in PA applies.
What to Do if a Debt Collector Tries Collecting After the Statute of Limitations Runs Out
While a creditor cannot sue you if the statute of limitations has run, they can still call you and send you letters to try to collect on that debt.
If a creditor calls you about unpaid debt, ask to have verification of that debt in writing. You are entitled to written verification of the type and amount of debt, the identity of the original creditor if the debt was sold, the date you allegedly became indebted, and the date you allegedly defaulted under the federal Fair Debt Collection Practices Act (FDCPA).
Under the FDCPA, you can also ask the creditor to stop contacting you about the debt whether or not the statute of limitations has run, and that creditor must comply. If the creditor fails to comply and continues collection efforts, you can sue that creditor in federal court and the court will impose mandatory monetary sanctions on the creditor.
Debt Relief Programs
If the PA statute of limitations has not run out on an unpaid debt and you are concerned about being sued, you might try negotiating a different payment plan or a reduced total with the creditor. Be advised that making a payment or entering a new agreement with a creditor restarts the statute of limitations.
You might also consider consolidating your debt if you have more than one debt. A debt consolidation company negotiates with your creditors for you. You make one payment to the debt consolidation company, and the company in turn pays your creditors.
The downside of debt consolidation is that your creditors are not bound to enter any consolidation plan. They can still sue you even if you have consolidated all of your other debts.
These Four Mistakes Could Reset the 4-Year Timer under the Statute of Limitation on Debt in PA
1. Don’t Make Payments After Defaulting
Making payments on a debt after defaulting on a debt can reset the statute of limitations. This could happen both in the short term, such as when a partial payment is made several months after an account has entered default. In that case, four years will likely be counted from the time the final payment was made.
This advice becomes even more important after the statute of limitations has run out. If you make a payment after four years, the protections of the statute of limitations could be reset, and if the creditor intends to seek a judgment they could have four more years to do so.
Imagine that Jennifer Doe defaulted on a credit card payment when she was at college. After a few nasty phone calls and stern letters from the card company, she never heard another thing about the card for six years. Then one day she receives a call from a debt collector, who convinces her to make a small payment on the old credit card. The new owner of the debt might now be able to sue Nancy, seeking a judgment on the old credit card account. The one small payment can be considered to have reset the Statute of Limitations.
2. Don’t Admit to Owing a Debt
Predatory collections agents may try to trick you into assuming liability for a debt that has lapsed under the Statute of Limitations. They are not obligated to tell you that the debt is not presently collectible, and even when they do disclose such information, it is often cloaked in legal terminology meant to confuse the average citizen. Do not sign papers or contracts presented to you by a debt collector.
3. Don’t Ignore a Lawsuit
Creditors may attempt to seek a judgment against you for outstanding debts even after the statute of limitations has run out. Even if you are certain the statute of limitations has run its course on the debt, you must respond to the filing. Ignoring the lawsuit could result in a default judgment making the debt legally enforceable.
Unscrupulous debt buyers rely on the assumption that debtors won’t respond to their lawsuit, and they are often correct. This is how they profit: buying bad debts for pennies on the dollar, then collecting as much of the full debt as possible.
Let’s learn from the example of Jennifer Doe above.
4. Don’t Be Intimidated by Old Debt
The debt process can be confusing. Having debt collectors hound you over a decade old account or worse, threaten to sue you, is a serious matter. That’s why you need a bankruptcy lawyer who you can trust to fight for your interests.
Filing for Bankruptcy in PA
The only way to force creditors to the table is to file bankruptcy. Whether you need to get medical or credit card debt discharged, you need to catch up with past-due car or mortgage payments, or you need to renegotiate your mortgage or car loan, bankruptcy is the tool to get that done.
Talk With an Experienced Bankruptcy Lawyer to Help Your Case
Your initial case consultation is free of charge. Take this opportunity to explore your options in dealing with debt you cannot pay, whether the statute of limitations has run or not.
Call us today – we’ve helped thousands of Pennsylvanians greatly improve their financial situation, including many individuals and families who did not realize how much bankruptcy could help to quickly turn their life around. Find out how we can put a smile on your face and help you get a fresh start too.