There are moments when you are faced with a financial setback and debts may have invaded your thoughts. You may have problems with your mortgage, your car payments, your monthly utility bills, your family's medical emergencies, and other expenses. In such cases, you may actually feel bombarded with financial problems.



Before you suffer a nervous breakdown, it will be much better if you analyze your debts first. The first step in a debt recovery plan is to examine which among your debts should be prioritized. In analyzing your debt priorities, you should realize that debts should be in your top list of settlement if you will end up in foreclosure, repossession and negative legal consequences. However, if you have time-barred debts, you should eliminate them from your priority list.

What is a Time-Barred Debt?

List down your debts according to the date you acquired each of them. Put the recently acquired debts on the top and the old debts at the end of your list. Once you have determined which debts are old, examine if they are time-barred.

Some debts actually have expiration dates. This means that collectors or lenders of these debts cannot file a lawsuit against you in order to collect your payments for the debt you owe them. The debt collector has a limited number of years to collect your debts or to sue you for a missed or unpaid debt.

The Statute of Limitations

The statute of limitations is the state law or regulation that limits how many years a debt collector or a lending company can claim for an unpaid debt or go after a borrower. This law states the actual time period when a creditor can file a law suit and take other legal actions against someone who has failed to pay for his financial obligations.

You have to note that the statute of limitations is different from state to state. It may also vary for various kinds of debts and various financial capabilities of borrowers. In addition to that, the time period may also be extended depending on the financial claims and agreements between the creditor and the borrower. The usual range is three (3) to ten (10) years.

Is Your Debt an Open- or Closed-End Credit?

The first step in identifying the statute of limitations for your debt is to classify it. Determine if the debt is an open-end or closed-end credit. Usually, debts that are closed-end have shorter time limits.

Open-end credits refer to those credit or debt accounts, which you can use repeatedly. The most common example of this is your credit card debt. Note that you can use your credit card to make debts over and over again. In open-end credits, the time period starts the moment your first payment for the debt is due.

On the other hand, closed-end credits refer to those debt accounts that you use for a single purchase or a one-time transaction. These include debts such as your mortgage, your car loan, or your emergency loan. The payments for this type are fixed in terms of amount and regularity. The time period for these debts starts on the loan's maturity date or due period.