Business Debt Statute of Limitations by State
Statute of Limitations on Business Debt: 50-State Overview
Complete guide to statute of limitations on business debt in all 50 states. Understand time limits for debt collection and your legal rights.
Understanding Statute of Limitations#
The statute of limitations is the time period during which a creditor can sue you for an unpaid debt. After this period expires, the debt becomes 'time-barred' and creditors can no longer sue you to collect it.
However, the debt doesn't disappear – creditors can still attempt to collect, and the debt may still appear on your credit report. Understanding your state's statute of limitations is crucial for making informed decisions about old business debt.
Statute of Limitations by State#
Statute of limitations varies significantly by state, typically ranging from 3-10 years for written contracts.
- California: 4 years for written contracts, 2 years for oral contracts
- Texas: 4 years for written contracts, 4 years for oral contracts
- New York: 6 years for written contracts, 6 years for oral contracts
- Florida: 5 years for written contracts, 4 years for oral contracts
- Illinois: 10 years for written contracts, 5 years for oral contracts
- Pennsylvania: 4 years for written contracts, 4 years for oral contracts
- Ohio: 8 years for written contracts, 6 years for oral contracts
When the Clock Starts#
The statute of limitations typically begins on the date of last payment or the date of default, whichever is later. However, certain actions can restart the clock including making a payment, acknowledging the debt in writing, or entering into a new payment agreement. Be very careful about restarting the statute of limitations on old debt.
Time-Barred Debt Collection#
Even after the statute of limitations expires, creditors may still attempt to collect. They can call you, send letters, and report the debt to credit bureaus (for up to 7 years from the date of first delinquency). What they can't do is sue you successfully. If sued on time-barred debt, you must raise the statute of limitations as a defense – it's not automatic.
Should You Pay Time-Barred Debt?#
Whether to pay time-barred debt is a personal decision. Paying may improve your credit and clear your conscience. However, making any payment restarts the statute of limitations, giving creditors the right to sue again. If you decide to pay, negotiate a settlement for less than the full amount and get written agreement before paying.