Banking Category Banking: the easy, simple banking guide

Unpaid Debt Laws

Statute of limitation laws place a limit on how long unpaid debt can be collected. After that date, collectors are not allowed to demand payment of the unpaid debt. The consumer may waive their statute of limitations by reaffirming the debt. Even when the debt is within the statute of limitations, there are strict laws on what collectors can and cannot do to collect unpaid debt.

Statute of Limitation

The statute of limitations is how long a creditor can go to court to force payment of a debt, such garnishing your wages or place a lien on your property. After that time, the courts cannot be used to collect the money. In the United States, the statute of limitations on unpaid debt varies from state to state. They also vary on the type of debt. Written contracts, oral contracts and promissory notes may have different statutes of limitations even within the same state. The states with the shortest statute of limitations are Alaska, Maryland, Mississippi, New Hampshire, North Carolina and South Carolina at three years. The state with the longest statute of limitations is Rhode Island at 10 years.


If an unpaid debt is reaffirmed in bankruptcy, the consumer has given up the right to refuse to pay due to the statute of limitations. A new promise to pay a debt may restart the statute of limitations, though in some states that promise must be in writing to hold up in court. Sending a payment may not restart the legal obligation to pay unpaid debts. However, signing up with a debt settlement company may result in waiving the statute of limitations in exchange for a debt settlement. The statute of limitations does not prevent collectors from filing a lawsuit, but it may prevent them from winning it.


The law does not allow someone to go to jail for unpaid debt with the exception of unpaid child support. It is against the law for debt collectors to threaten to put someone in jail for unpaid debt. Collectors can threaten to repossess property that is held as collateral for the unpaid debt, but they cannot take any other property. If the debt owed on one car is unpaid, the creditor cannot take any other vehicles. Debt collectors can demand payment. However, laws to protect consumers with unpaid debt state that they must first win a lawsuit against the consumer before they can take money out of someone’s bank account or garnish their paycheck. An unpaid mortgage debt can lead to eviction, but this process takes several months. If someone’s check is garnished due to unpaid debt, the collector cannot take more than 75 per cent of their check in most cases.