Can a Collection Agency Sue After the Statute of Limitations Expires?

You can end up in court after the SOL passes.

A debt collection lawsuit is of the most frightening outcomes for debtors struggling with collection agencies. You are responsible for the debt until you pay it, but each state places a limit on the amount of time a collector has to sue you via the debt collection statute of limitations  Unfortunately, the statute of limitations does not provide you with absolute protection, and you could still face a collection agency lawsuit after the statute of limitations passes.

Lawsuits After the Statute of Limitations

When a collection agency sues you, it must send you a summons. The summons notifies you that you're being sued, contains the date, time and location of the hearing and gives you an opportunity to respond and claim a defense. The vast majority of people who are sued by collectors do not respond to their summons. In most cases, this is simply a matter of fear. They either know that the debt is theirs and believe that because the debt is legitimate they cannot fight it or don't know what to do – so they do nothing.

When you don't respond to a summons and claim a defense, the collection agency wins its case by default. Because no one is there to contest their claims, they don't have to prove a thing to the court and the judge awards the collection agency a default judgment.

Don't assume just because the statute of limitations has passed that a collection agency will not sue you. Because so few debtors bother to defend themselves, the collection agency's game of legal roulette has excellent odds. You see, the statute of limitations is an affirmative defense. That means that you can have the case dismissed but only if you bring up your defense in court. If you don't appear in court and defend yourself, the judge has no way of knowing that the statute of limitations on the debt has expired – and the debt collector certainly isn't going to volunteer the information.

Surprise! You Owe a Default Judgment!

The judge doesn't know the SOL expired unless you appear

A collection agency cannot file a lawsuit against you without sending out a summons. You must be notified of the lawsuit. If you aren't aware that a collection lawsuit is underway, you aren't able to defend yourself. If the statute of limitations has already expired on your debt, the collection agency knows that you have an affirmative defense. Thus, its in the collector's best interests to ensure that you never receive a summons.

Collection agencies get away with this in different ways. Some don't mail out a summons at all while some intentionally send the summons to an old or incorrect address (the collection agency can view your old addresses on your credit report). Unless you live in a state that requires you to be served with a summons in person, don't be too surprised to check your credit report one day and find a collection judgment.

Filing an Appeal to Remove Judgment

Although state laws regarding judgment appeals differ, you usually have a set amount of time to appeal a judgment. One of the grounds under which you can appeal is improper service. Because you weren't able to defend yourself in the original hearing, the court may schedule a new hearing and make a new ruling.

You don't have the ability to appeal a collection judgment indefinitely. Most states have a time limit for appeals. Let's say, for the sake of argument, the window of opportunity for filing an appeal is six months. If you aren't aware of the judgment, the collection agency may wait seven months before it garnishes your wages or freezes your bank accounts. Once this occurs, you know without a doubt that the collector has a judgment against you. Had the garnishment occurred earlier, you could have appealed, but the collector has waited just long enough to ensure that you no longer have the right to appeal before enforcing its judgment.

Protecting Yourself After the Statute of Limitations Runs

Got a surprise judgment? Kiss your money goodbye

Your goal in protecting yourself after the statute of limitations runs is to make sure the collection agency can't do anything sneaky to nail you with a garnishment, bank levy or property liens. Subscribing to a credit monitoring service is one way to do just that. I am a big, big fan of credit monitoring services. When anything changes on your credit report or something new gets added, the credit monitoring service will automatically notify you. This prevents the collector from keeping a default judgment a secret until you can no longer contest it. Although the credit bureaus each offer credit monitoring, a third party company that provides you with a tri-bureau report gives you more bang for your buck.

And whatever you do, never ever ignore a summons just because the statute of limitations on the debt has expired. You'll regret it dearly when the collector uses a default judgment to drain you financially and destroy your credit.

Related Articles:

How to Respond to a Bill Collector's Lawsuit

Can You Reset the Statute of Limitations on a Debt?

Collection Lawsuit Statutes of Limitations By State