A statute of limitations (SOL) is a statute (law) that prescribes the period of time during which legal action may be taken. In respect to debt obligations, the statute of limitations sets forth the specific time frames during which the creditor or debt collector can legally sue the debtor.
What is the statute of limitations on debts in the State of Texas?
The statute of limitations on debt for residents of the State of Texas is four (4) years. In Texas, this refers to oral agreements, written contracts (car loans, installment loans), promissory notes and open accounts (such as credit card credit lines).
When does the clock start on the four year statute of limitations?
Texas state laws are more consumer friendly than most states where the statute of limitations starts after the account has been charged off.
In Texas, the Statute of Limitations clock starts on the day the last payment on the account was made. This is often referred to as the ‘date of last activity’ or DLA.
Example: If the last payment on a credit card was made on January 1, 2005, then the statute of limitations for legal action on the account would expire on January 1, 2009. On January 2, 2009, the debt no longer carries a legal obligation to pay.
Why is the date of last activity important?
Many unscrupulous collection agencies inaccurately report the date of last activity on consumer credit reports or debt validations. In some cases, debt collection agencies have gone so far as to file suit against an alleged debtor after the statute of limitations has expired.
As a result, uninformed consumers may take a default judgement in a legal proceedings and are then required by law to pay the debt owed.
How can I verify the date of last activity for a specific debt?
There are several ways to verify the date of last activity, including:
- Checking your consumer credit report
- Contacting the debt collection agency and requesting this information, preferably via a certified letter or recorded phone call
- Verifying your past payment records via archived bank information
Are there instances in which the statute of limitations can be reset?
Yes. If a debtor makes a payment on an account to the debt collection agency and brings the account back to ‘current’ status, the statute of limitations resets and a new 4 year time frame begins. This gives the debt collection agency the ability to file suit against the debtor for the remainder of the balance due.
What do I do if a debt collector has threatened legal action or filed suit and my account is past the 4 year statute of limitations?
If a debt collector has threatened legal action, they may be violating Texas Law. Consult an attorney.
If a debt collector has filed suit, you must respond to the suit or a default judgement may be granted by the court, meaning you would be required, by law, to pay the debt. It is highly recommended that you consult a consumer law attorney to deal with the courts and debt collector.
If you can prove, by way of your credit report, correspondence from the debt collector, or through bank records, that the debt is outside of the 4 year statute of limitations, you are not liable for the debt.
What Texas law outlines the 4 year Statute of Limitations?
Four year statute of limitations is outlined in Civil Practice & Remedies Code – Chapter 16, Section 004.