Breaking Down Michigan’s Debt Statute of Limitations: What You Need to Know to Protect Your Finances
Debt can be a significant source of stress and anxiety, and it's essential to understand your rights and options when it comes to debt collection. In Michigan, the statute of limitations for debt collection depends on the location of the collection company, so it's crucial to understand the laws that apply to you.
What is Michigan's Statute of Limitations on Debt and What Does it Cover?
The statute of limitations is the time limit in which a creditor can take legal action to collect a debt. Once the statute of limitations has expired, the debt becomes "time-barred," and the creditor cannot take legal action to collect the debt. However, the debt still exists, and the creditor can still attempt to collect it through other means, such as contacting you to make payment arrangements. Your credit report will also still reflect the outstanding balance.
In Michigan, the statute of limitations for debt collection varies based on the type of debt and the location of the collection company. For example, the statute of limitations for written contracts, such as credit card debt, is six years from the date of the last payment or charge on the account. However, if the collection company is located in another state, the statute of limitations may be different.
The Four Types of Debt in Michigan by Category
Forbes Magazine broke down the 4 different types of debt considered and defined them as well:
A written contract is a physical document signed by both the borrower and the creditor. It outlines the agreement, including the terms and conditions of the loan, and is legally binding. Examples include car loans and medical debt.
Oral contracts are spoken agreements, usually between two people who know each other. Because these contracts aren’t in writing, they’re harder to legally enforce.
Similar to a written contract, a promissory note is a written promise of payment. It includes the amount to be paid, who will pay it, interest terms and a time frame for payment. It contains less detail than a written contract and only requires the borrower’s signature. A common example of a promissory note is a private student loan.
Open-ended contracts are accounts that provide a credit line. This means even if you owe money, the account remains open—if you’re making payments. You can constantly borrow and repay debt with an open-ended account. Credit cards are a common example of open-ended contracts.
It's essential to note that the statute of limitations can be reset in certain circumstances. For example, if you make a payment on the debt or acknowledge the debt in writing, the clock could be reset, starting the process and possibly the statute once again.
How to Report Debt Collection Harassment in Michigan
If you're dealing with debt collection in Michigan, it's important to know your rights. Debt collectors are prohibited from engaging in abusive, deceptive, or unfair practices under the Fair Debt Collection Practices Act. This includes contacting you after 9pm, using threatening or harassing language, or misrepresenting the amount or status of the debt.
Additionally, if you believe that a debt collector has violated your rights, you may be able to file a complaint with the Michigan Attorney General's office or file a lawsuit against the debt collector.