Understand statute of limitations on deficiency judgments by state, how long lenders can pursue collection, and when debt becomes uncollectible

If you owe a deficiency balance after car repossession, one of your most important questions is: "How long can they legally pursue me for this debt?" The answer depends on two critical timelines: the statute of limitations for lawsuits and the credit reporting period. Understanding these timelines helps you make strategic decisions about whether to pay, negotiate, or wait.

This guide explains statute of limitations by state, what happens when it expires, how judgments extend collection rights, and how this affects your credit and financial decisions.

Two Different Timelines You Need to Know

There are two separate timelines that govern deficiency balances:

Timeline 1: Statute of Limitations (Lawsuit Timeline)

What it is: The period during which a lender can legally sue you to collect the debt.

Typical duration: 3-6 years in most states (varies significantly)

Clock starts: From your last payment or date of default

What happens when it expires:

• Lender can no longer sue you
• Debt becomes "time-barred"
• You can still be contacted, but they can't take legal action
• Debt is essentially unenforceable

Important: Making a payment or acknowledging the debt in writing can restart the clock.

Timeline 2: Credit Reporting Period

What it is: How long the debt appears on your credit report.

Duration: 7 years from date of first delinquency (federal law, applies to all states)

Clock starts: From the date of your first missed payment that led to the repo

What happens when it expires:

• Debt automatically removed from credit reports
• No longer affects your credit score
• Debt may still be legally owed (depends on statute of limitations)

Important: Credit reporting and statute of limitations are independent. One can expire while the other is still active.

How They Interact

Common scenarios:

Scenario 1: Statute expires first (shorter than 7 years)

• Example: 3-year statute in Louisiana
• After 3 years: Can't be sued, but still on credit report for 4 more years
• After 7 years: Off credit report, still can't be sued

Scenario 2: Credit reporting expires first (statute longer than 7 years)

• Example: 10-year statute in West Virginia
• After 7 years: Off credit report, but can still be sued for 3 more years
• After 10 years: Off credit report and can't be sued

Scenario 3: Both expire around the same time

• Example: 6-year statute
• After 6 years: Can't be sued
• After 7 years: Off credit report (about same time)

For background on what happens after repo, see our article on what is a deficiency balance.

Statute of Limitations by State

Statute of limitations for written contracts (which includes auto loans) varies by state:

3-Year States

• Louisiana: 3 years
• Mississippi: 3 years

4-Year States

• Arkansas: 4 years
• California: 4 years
• Colorado: 4 years (UCC contracts)
• Florida: 4 years (written contracts with specific performance date)
• Idaho: 4 years
• Indiana: 4 years
• Louisiana: 3 years (10 years if written)
• Michigan: 6 years
• Minnesota: 6 years
• Nevada: 4 years (written contracts)
• New Hampshire: 3 years
• New York: 6 years
• North Carolina: 3 years
• Oregon: 6 years
• Pennsylvania: 4 years
• South Carolina: 3 years
• Tennessee: 6 years
• Texas: 4 years
• Utah: 6 years
• Virginia: 3 years (5 years under seal)

5-Year States

• Georgia: 6 years (written contracts)
• Illinois: 5 years (written contracts), 10 years (written instruments)
• New Mexico: 4 years (written contracts)
• New York: 6 years
• North Dakota: 6 years
• Oklahoma: 5 years
• South Dakota: 6 years
• Wisconsin: 6 years

6-Year States

• Connecticut: 6 years
• Kansas: 5 years (most contracts), 3 years (oral)
• Maine: 6 years
• Massachusetts: 6 years
• Nebraska: 5 years
• North Dakota: 6 years
• Vermont: 6 years
• Wyoming: 10 years

10-Year States

• Rhode Island: 10 years
• West Virginia: 10 years
• Wyoming: 10 years

Important: These are general guidelines. Some states have different rules for different types of contracts. Always verify with a local attorney or your state attorney general's office.

When Does the Clock Start?

General rule: Clock starts from:

• Date of last payment, OR
• Date you defaulted on the loan, OR
• Date of charge-off

Example:

• Last payment: March 2020
• Car repossessed: August 2020
• Deficiency notice: October 2020
• Clock starts: March 2020 (last payment)
• 4-year statute expires: March 2024

What Restarts the Clock?

These actions can restart the statute:

Making a payment:

• Even $1 payment resets the clock to that date
• New expiration date is calculated from payment date

Acknowledging the debt in writing:

• "Yes, I owe this" in writing
• Signed payment agreement
• Written promise to pay

In some states, verbal acknowledgment:

• Depends on state law
• Safer to assume it does restart the clock

What does NOT restart the clock:

• Simply talking to collectors (without acknowledging debt)
• Disputing the debt
• Asking for validation
• Being sued (if lawsuit is filed)

Strategy warning: If statute is close to expiring, avoid:

• Making payments
• Agreeing you owe the debt
• Signing anything
• Detailed discussions about the debt

For strategies on handling this, see our guide on how to deal with deficiency debt.

What Happens When Statute Expires

Once the statute of limitations expires, the debt becomes "time-barred."

What This Means

They CAN still:

• Contact you about the debt (calls, letters)
• Report it on your credit (until 7 years from first delinquency)
• Sell the debt to collection agencies
• Ask you to pay voluntarily

They CANNOT:

• Sue you in court
• Get a judgment against you
• Garnish your wages (without pre-existing judgment)
• Levy your bank account (without pre-existing judgment)
• Place liens on property (without pre-existing judgment)

In essence: The debt still exists, but they've lost the legal power to enforce it through the courts.

Can You Still Be Contacted?

Yes, legally they can still:

• Call you
• Send letters
• Ask for payment

Your rights:

• Send cease-and-desist letter under Fair Debt Collection Practices Act
• Request they stop contacting you

Sample cease-and-desist letter:

"Dear [Collection Agency],

This letter is formal notice to cease all communication with me regarding account #[Number].

I am aware that the statute of limitations on this debt has expired in my state. This debt is time-barred and you cannot sue me to collect it.

Under the Fair Debt Collection Practices Act, I request that you:

1. Cease all phone calls to me
2. Cease all written communication except to confirm receipt of this letter
3. Remove my phone number from your calling system

This letter is not an acknowledgment that I owe this debt. Any further contact will be considered harassment and I will report it to the Consumer Financial Protection Bureau and my state attorney general.

[Your Signature] [Date]"

Send via certified mail, return receipt requested.

After sending: They can only contact you to:

• Confirm they received your letter and will stop
• Notify you they're taking specific action (like filing lawsuit—but they can't if statute expired)

Should You Pay a Time-Barred Debt?

Arguments for paying:

• It's the right thing to do (you did receive the loan)
• Removes it from your credit report sooner (if you pay in full)
• Peace of mind

Arguments against paying:

• Restarts the statute of limitations clock
• You may owe taxes on forgiven portion if you settle
• Money could be better used elsewhere
• Lender already wrote it off for tax purposes

Middle ground: Negotiate settlement carefully

• If you pay, negotiate deep discount (20-40% of balance)
• Get "paid in full" agreement in writing
• Understand you're restarting statute by paying
• Understand tax implications

Consult an attorney before paying time-barred debt to understand implications.

Judgments: How They Extend Collection Rights

If the lender sues you before the statute expires and wins, everything changes.

What Is a Judgment?

A judgment is:

• Court order saying you owe the money
• Gives lender powerful collection tools
• Extends collection timeline dramatically

How Long Do Judgments Last?

Typical duration:

• 10 years in many states
• 10-20 years in some states
• Renewable in most states (can extend for another 10-20 years)

State examples:

• California: 10 years, renewable
• Florida: 20 years
• Illinois: 7 years, renewable for another 7
• New York: 20 years
• Texas: 10 years, renewable

Reality: A judgment can effectively last indefinitely if renewed.

Collection Powers With a Judgment

Once they have a judgment, creditors can:

Wage Garnishment:

• Court orders employer to withhold portion of paycheck
• Typically 10-25% of disposable income
• Continues until debt is paid

Bank Account Levy:

• Court orders bank to freeze and turn over funds
• Can empty checking/savings accounts
• May happen without warning

Property Liens:

• Lien placed on real estate you own
• Must be paid when property is sold or refinanced
• Can cloud title and prevent transactions

Asset Seizure (rare for deficiencies):

• Court can order seizure of personal property
• Uncommon for deficiency debts but legally possible

Judgment Interest

Most states allow interest to accrue on judgments:

• Typical rate: 5-10% per year
• Continues until judgment is paid
• Can significantly increase what you owe

Example:

• Judgment: $8,000
• Judgment interest: 8% per year
• After 5 years: $8,000 + $3,200 = $11,200

How to Avoid Judgments

Best strategy: Settle before lawsuit:

• Once you're sued, negotiate immediately
• Settling before judgment saves you from extended collection power
• Offer lump sum to avoid court

If sued:

1. Respond to the lawsuit (don't ignore it)
2. Show up to court
3. Hire attorney if possible
4. Negotiate settlement even up to court date
5. Raise defenses (improper sale, incorrect amount, statute expired, etc.)

Default judgments:

• If you don't respond or show up, you automatically lose
• This is worst outcome—no chance to negotiate or dispute

For negotiation strategies, see our guide on negotiating deficiency balances.

Credit Reporting Timeline

Separate from legal collection, credit reporting has its own timeline:

7-Year Rule

Federal law (Fair Credit Reporting Act):

• Negative marks stay for 7 years from date of first delinquency
• Cannot be extended or renewed
• Applies nationwide

Date of first delinquency:

• The date you first missed a payment that led to the repo
• Usually the month before repossession

Example:

• First missed payment: January 2020
• Car repossessed: June 2020
• Deficiency created: August 2020
• All related negative marks must be removed by: January 2027

What Appears on Credit Report

Related to repo and deficiency:

• Repossession entry on auto loan account
• Late payments (30, 60, 90, 120+ days)
• Charge-off entry
• Collection account (if sent to collector)
• Judgment (if sued and lost)

All must be removed after 7 years from the original delinquency date.

Judgment Exception

Judgments have a special rule:

• Public record judgments: 7 years from date of judgment OR until statute expires, whichever is longer
• Some states allow longer reporting for unpaid judgments

Example:

• Judgment entered: January 2022
• Judgment duration: 10 years
• Credit reporting: January 2029 (7 years) OR January 2032 (when judgment expires), whichever is longer

After 7 Years

What happens:

• All repo-related entries automatically deleted
• Credit score no longer affected by the repo
• Clean slate (for this debt)

What does NOT happen:

• Debt doesn't automatically disappear
• If statute hasn't expired, you can still be sued
• If judgment exists, collection can continue

For credit recovery strategies, see our guide on rebuilding credit after repossession.

State-Specific Considerations

Some states have unique rules worth noting:

California

Statute: 4 years Judgment: 10 years, renewable Special rule: If you put 40%+ down payment or financed less than $5,000, lender cannot collect deficiency

Texas

Statute: 4 years Judgment: 10 years, renewable Wage garnishment: Generally not allowed except for certain debts (not including deficiencies) Bank levies: Allowed

Florida

Statute: 4-5 years (depends on contract type) Judgment: 20 years Special consideration: Long judgment period makes settling before lawsuit critical

New York

Statute: 6 years Judgment: 20 years Note: Long judgment period; avoid litigation at all costs

North Carolina

Statute: 3 years (one of the shortest) Judgment: 10 years Strategy: Waiting out statute may be viable if you can't pay

Strategic Decision-Making

Understanding these timelines helps you make strategic decisions:

Scenario 1: Recent Deficiency (Under 1 Year)

Statute: 3-6 years left Credit reporting: 6+ years left Best strategy: Negotiate settlement for 30-50% of balance

Why: Plenty of time for them to sue. Best to resolve now with favorable terms.

Scenario 2: Mid-Age Deficiency (2-3 Years Old)

Statute: 1-4 years left Credit reporting: 4-5 years left Best strategy: Negotiate aggressive settlement (25-40%) or wait strategically

Why: Your leverage increases as statute approaches expiration. They're more motivated to settle.

Scenario 3: Near Statute Expiration (6 Months to Expiration)

Statute: Under 6 months left Credit reporting: 2-5 years left (depending on when it started) Best strategy: Consider waiting for expiration if you can't afford even a small settlement

Why: Maximum leverage. They'll often accept tiny settlements or may give up.

Warning: If they sue before expiration, judgment extends timeline by 10-20 years.

Scenario 4: After Statute Expires

Statute: Expired Credit reporting: Still reporting (if under 7 years) or expired Best strategy: Send cease-and-desist letter; generally don't pay

Why: They have no enforcement power. Paying restarts the clock.

Exception: If you want to clear your conscience and can negotiate 80-90% discount, some people choose to pay.

Scenario 5: Judgment Already Entered

Collection timeline: 10-20 years Best strategy: Negotiate settlement immediately or consult bankruptcy attorney

Why: Judgment gives them powerful collection tools. Better to settle than face garnishment/levy.

Frequently Asked Questions

Can they sue me after statute expires?

Technically: They can file a lawsuit anytime.

Practically: If you raise the statute of limitations as a defense (you MUST do this—it's not automatic), the case will be dismissed.

Important: You must respond to the lawsuit and raise this defense. If you don't show up, you'll lose by default even if statute has expired.

Does settling restart the statute?

No: Settling (paying a negotiated amount) does NOT restart the statute if it's already expired.

But: Making payments BEFORE statute expires does restart it.

Timing matters: Settle after statute expires (if you're waiting it out) or settle well before it expires (if you're being proactive).

Will collectors tell me if statute has expired?

No: They're not required to inform you, and many won't.

They may mislead you: Some collectors imply you must pay even when statute has expired.

Your responsibility: Track the dates yourself.

Can I be arrested for not paying?

No: Deficiency debts are civil matters, not criminal. You cannot be arrested or jailed for not paying.

Exception: If you're ordered by court to pay (after judgment) and willfully refuse to comply with court orders, that's contempt of court (different issue, very rare).

What if I move to a different state?

General rule: The statute of limitations from the state where you signed the loan agreement applies, OR the state where you currently live, whichever is shorter (varies by state).

Complex issue: Consult with an attorney if you've moved states.

Your Timeline Tracking Worksheet

Track your deficiency timeline:

Dates to record:

• Date of first missed payment: ____________
• Date of repossession: ____________
• Date deficiency notice received: ____________
• Last payment made (if any): ____________

Calculate key dates:

• Statute of limitations in my state: _____ years
• Statute expiration date: ____________
• Credit reporting expiration date (7 years from first missed payment): ____________

Current status:

• Time until statute expires: _____ years, _____ months
• Time until credit reporting expires: _____ years, _____ months

Action plan based on timeline:

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The Bottom Line

How long lenders can collect depends on:

1. Statute of limitations (3-10 years): After this, they can't sue you
2. Credit reporting (7 years): After this, it's off your credit report
3. Judgment (10-20+ years): If they sue and win, collection rights extend dramatically

Key strategies:

• If statute expires soon: Consider waiting it out
• If recently repossessed: Negotiate settlement now for best terms
• If threatened with lawsuit: Settle immediately to avoid judgment
• If judgment already exists: Negotiate or consider bankruptcy

Take action: Don't just hope for the best. Make a strategic decision based on your specific timeline and circumstances.

For comprehensive strategies on addressing deficiency debt, see our guide on how to deal with deficiency debt.

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