When is a debt no longer collectable?

Legal obligations owed to others do not last forever under our civil law.  Under civil law contracts and promises to pay money expire after a certain period of time.  Each state adopts its own “statute of limitations” relating to contracts and promises to pay money.  Once the statute of limitations passes, the creditor can no longer bring a successful lawsuit to collect the money.  If someone claims that you owe them some money, one of the first things you need to find out is whether this debt has expired or not under the applicable law.

For claims brought under Missouri law, the period of the applicable statute of limitations depends on the nature of the claimed debt.  There are several different statute of limitations in Missouri for different types of claims.   In this article, I will consider only those type of claims related to “contracts”.    First of all, a contract is defined as a legally enforceable agreement between two or more parties that creates an obligation to do or not do particular things.  Examples of contracts can include an agreement to pay credit card charges, a lease agreement, a promissory note, an oral or written agreement to pay for natural gas or electricity provided to your residence and an agreement to pay for other things and services.

Generally, the statute of limitations on such debts is five years. (See Section 516.120. Revised Statutes of Missouri).   This five year statute of limitation applies to both oral and written agreements.  If the claim is based upon a “writing based upon a claim for payment of money or property” the ten year statute of limitations applies. (See Section 516.110 RSMo).     Please note that this ten year statute of limitations require both a “writing” and “a claim for money or property.”  There is a difference from a written claim based upon the payment of money or property than an agreement to pay a debt.  An example of a written claim payment for money would be a promissory note.  A written agreement where you agree to pay for charges from your credit card is not a claim “based upon payment for money”, but a claim based upon your promise to pay for you credit card charges,  Most written agreement do not involve claims for money or property and therefore the statute of limitations on these would be five years.

Court judgments have a ten year statute of limitations which are renewable under law.  Finally, a promissory note secured by a deed of trust on real estate has a 20 year statute of limitations from the date at which the last payment is due under that instrument.

Another important issue relating to statute of limitations is when the beginning date for calculating the statute of limitations is.  In connection with a credit card debt it would be the date you made the last charge or payment.  Making a payment actually restarts the date used to calculate the statute of limitations.  Basically, the statute of limitations begins for these various types of debts when the debtor is last involved.  When the last charge was made or when the last payment is made are examples of the activity of debtor that restarts the statute of limitations.

There are other defenses to contracts that can be raised other than the statute of limitations.  For example, some types of contracts must be in writing to be enforceable.  If you have any questions about the statute of limitations or other defenses to claims under contract, you should seek advice from a lawyer.

 

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