Facts Of The Statute Of Limitations On Debt In California

By Sean A. Kelly

Statute of limitations on debt in California would mean the time period applicable within which a creditor would be able to sue a debtor in the state of California for default on the debt. Once the statute of limitations expires, the creditor would not be able to file a suit against the defaulting debtor to recover losses. Depending upon the type of credit agreement reached between the creditor and debtor, the statute of limitations time period would vary. Under the laws laid down in the state of California with regards to the statute of limitations applicable, any oral agreement, promissory note, written agreement and open accounts and bankruptcy have various statutory time periods. The time period for promissory notes such as mortgage, refinance etc. and open accounts such as credit cards, store cards etc. would be four years. In case of oral agreements where the agreement between the creditor and the debtor might be made orally would be two years and for bankruptcy it would be 10 years. The law states that in case of expiry of the said time period, the debt would become non-collectible and the debtor would not be liable to pay.

According to the Statute of limitations on debt in California, the time duration from which the statute would begin would be the date of last payment or last transaction on the account. Hence when an account goes into delinquency and the debtor does not pay, the same would be reported in the debtor’s credit report. It would be beneficial to remember that a debt would remain to be reported as such till the debt gets paid in full. The only benefit for the application of statute of limitations would be, to give respite to the debtor in case the debtor does not pay within the time frame. After the statute time lapses, the debtor cannot be sued in a court of law.

It might stand one in benefit to understand that when one might be contacted near the end of the statute of limitations on debt, even a verbal acceptance of the debt would reset the time period of the statute and the creditor would now be legally right to sue the debtor. It might be better not to accept that any debt remains payable. The calls that might be received nearing the end of the statute of limitations time might be made by the debt collection agencies which might have bought the debt for very little amount from the actual creditor and might be out to collect the monies. Stating that the statute of limitations has ended when contacted by the collection agent and claiming no pending debts might be useful as the debtor would not be able to sue.

Since the debt does not get erased from one’s credit report and might hamper one’s credit scoring, it might be better to approach a debt help company which might be experienced in handling debt that might be very high for the debtor to pay. A debt relief company might help by negotiating with the creditor on the debtor’s behalf and might be successful in settling the debt payment by more than half. The credit report of the debtor might be affected for the next two to four years. However, at the end of the debt settlement program, one would have a cleaner credit report. The advantage of using debt relief might be that all of one’s unmanageable debts might get settled and one might have more cash in hand to start their financial life on a cleaner slate. It would therefore be beneficial to shop around for debt settlement companies with a credible and reliable track record to employ for handling one’s debt problems.

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