In every state, there are laws that limit the amount of time during which a creditor or debt collector can sue a debtor to collect a debt. These laws are known as statutes of limitations. This article will provide an in-depth look at the statute of limitations on different types of debt in Alabama, when in debt, people compare these two options bankruptcy vs debt settlement.
Understanding the Statute of Limitations
The statute of limitations is essentially a countdown that starts when you miss a payment on a debt. Once this countdown expires, creditors or debt collectors cannot sue you for the debt. However, it’s important to note that the expiration of the statute doesn’t erase the debt; it merely limits the legal remedies available to the creditor or collector.
The Statute of Limitations on Different Types of Debt in Alabama
Credit Card Debt
In Alabama, credit card debt is considered an open-ended account. The statute of limitations on credit card debt is three years. This means that if a debt collector wants to sue you over an unpaid credit card bill, they must do so within three years from the date you last made a payment.
Medical debt falls under the category of a written contract in Alabama. Therefore, the statute of limitations is six years. This six-year period starts from the date of your last payment or the date the debt was incurred, whichever is later.
Auto Loan Debt
Auto loans are also considered written contracts in Alabama. Therefore, the same six-year statute of limitations applies. If you default on your auto loan, the lender has six years from the date of your last payment to sue you for the remaining balance.
Mortgages are secured debts, and the statute of limitations for mortgage debt in Alabama is ten years. This means that if you default on your mortgage, the bank has ten years from the date of your last payment to initiate foreclosure proceedings.
What Happens When the Statute of Limitations Expires?
Once the statute of limitations on debt expires, that doesn’t mean the debt goes away. It simply means the creditor or collector can’t sue you to collect it. However, they can still attempt to collect the debt by calling you, sending letters, or reporting the debt to credit bureaus.
It’s also crucial to understand that the clock can be reset on the statute of limitations. Making a payment, entering a payment plan, or even acknowledging the debt could potentially restart the clock, giving the creditor or collector more time to sue.
Understanding the statute of limitations on debt in Alabama is crucial for anyone dealing with unpaid debts. It’s always advisable to seek legal advice if you’re facing potential litigation over a debt. Remember, while the expiration of the statute of limitations restricts legal action, the debt itself does not disappear and can still impact your credit score and financial health.
What is the statute of limitations on debt in Alabama?
The statute of limitations on debt in Alabama typically ranges from three to six years, depending on the type of debt.
What types of debt does the Alabama statute of limitations cover?
The Alabama statute of limitations covers different types of debt, including oral agreements, written contracts, promissory notes, and open-ended accounts like credit cards.
How long is the statute of limitations for written contracts in Alabama?
The statute of limitations for written contracts in Alabama is six years from the date of the last payment or the date the debtor defaulted on the agreement.
How long does the statute of limitations last for oral contracts in Alabama?
In Alabama, the statute of limitations for oral contracts is six years.
How is the start of the statute of limitations period determined in Alabama?
In Alabama, the statute of limitations period generally starts from the date of the last payment or the date when the debtor defaulted on the payment.
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What happens when the statute of limitations period expires in Alabama?
Once the statute of limitations period expires in Alabama, the creditor loses the right to sue the debtor for the unpaid debts. However, the debt still exists and the creditor can attempt to collect it.
Can the statute of limitations be restarted in Alabama?
Yes, the statute of limitations can be restarted or “re-aged” in Alabama if the debtor makes a payment or acknowledges the debt in writing after the statute of limitations has expired.
What is the statute of limitations for debt collection on promissory notes in Alabama?
The statute of limitations for debt collection on promissory notes in Alabama is six years.
Does the statute of limitations prevent creditors from reporting the debt to credit bureaus in Alabama?
No, the statute of limitations does not prevent creditors from reporting the debt to credit bureaus. Even after the statute of limitations expires, the debt can remain on your credit report for seven years.
What should I do if a creditor tries to sue me for a debt that is past the statute of limitations in Alabama?
If a creditor tries to sue you for a debt that is past the statute of limitations, you should consult with a legal professional. You can raise the expired statute of limitations as a defense in court.
- Statute of Limitations: The period of time within which legal action must be taken for an offense. After this time has passed, a claim can no longer be filed.
- Debt: Money owed by one party, the debtor, to a second party, the creditor.
- Creditor: An entity or person that extends credit by giving another entity permission to borrow money if it is paid back at a later date.
- Debtor: An individual or company that owes money to another individual or company (the creditor).
- Oral Contract: An agreement made verbally that is just as legally enforceable as a written contract. However, it can often be more difficult to prove its existence.
- Written Contract: A legal agreement between two or more parties, written on a document and signed by all parties involved.
- Open-End Account: A type of credit account, such as a credit card account, where the borrower can repeatedly borrow money up to a certain limit.
- Collection Agency: A company hired by creditors to pursue payments on debts that borrowers are defaulting or have defaulted on.
- Judgment: A formal decision made by a court in response to a lawsuit.
- Garnishment: A legal process where a part of a person’s salary is withheld and sent to a creditor to settle a debt.
- Bankruptcy: A legal proceeding involving a person or business unable to repay outstanding debts.
- Promissory Note: A written agreement to pay a specific amount of money on demand or at a specific time.
- Installment Loan: A type of loan that is repaid over time with a set number of scheduled payments.
- Lien: A legal claim or right against property or assets for the satisfaction of a debt or obligation.
- Revolving Credit: A type of credit that does not have a fixed number of payments, such as credit cards.
- Principal: The original sum of money borrowed in a loan or put into an investment.
- Interest: The cost of borrowing money, typically expressed as an annual percentage of the loan amount.
- Credit Report: A detailed report of an individual’s credit history.
- Default: Failure to repay a loan according to the terms agreed upon in the contract.
- Credit Score: A numerical expression based on a level analysis of a person’s credit files, representing the creditworthiness of that person.