If you’ve ever wondered how long creditors can chase you for unpaid debts in Illinois, this guide is here to help. In the State of Illinois, there’s a time limit set by the law for how long creditors have to take you to court and collect certain debts. This limit is called the statute of limitations. Basically, it tells creditors when and how they can use the courts to try and collect money from you. We’ll break down the time limits and legal steps creditors must follow, all explained in simple terms. So, if you’re facing the pressure of debt, read on to learn what you need to know.
Why Time Matters in Debt Collection
Creditors can keep trying to collect your debt outside of court for as long as they want, but there’s a catch. After a certain period, they can’t file a lawsuit to force repayment. Without involving the courts, these creditors don’t have much power. Simply stop answering their calls and toss away their mail. All they can do is bother you, but they can’t force you to pay.
How to Calculate the Time
The countdown begins when you miss a payment, not when you took out the loan. Keeping accurate payment records is crucial to proving your position.
Here’s the key: when calculating the statute of limitations (the deadline for creditors to sue you), skip the first day you missed the payment, but count the last day. However, there’s one more twist: if the last day falls on a Saturday, Sunday, or a holiday, it does not count. 5 ILCS 70/1.11
So, let’s say you missed a payment due on February 1st, 2023. With a 5-year statute of limitations in your state, you wouldn’t be protected from lawsuits until February 2nd, 2028 (excluding leap years).
In Illinois courts, the standard practice is to apply Illinois Law. However, there’s an exception known as the “borrowing statute.” This comes into play if you lived in another state when the default occurred, and the limitations period in that state is shorter.
In certain situations, there are provisions for extending the statute of limitations. For instance, if you file for Chapter 13 bankruptcy, and the case is later dismissed, the time during which the creditor is prohibited from collecting due to the automatic stay is not included in the calculation of the statute of limitations.
Resetting the Clock – Paying on Old Debts
If your debt has gone unpaid for many years, it’s not advisable to make a voluntary payment without a court order. Doing so might be viewed as an acknowledgment, possibly reviving the debt and resetting the clock on the statute of limitations. 735 ILCS 5/13-206
In fact, merely promising to repay a debt, even without following through, has the potential to reset the clock on the statute of limitations. The safest approach is to completely ignore all collection efforts once the statute of limitations has expired.
Time Limits for Creditor Lawsuits: Understanding the Statute of Limitations
Creditors often prefer legal action as it legally binds you to repay. The court can authorize measures like wage garnishment, repossession, levies or property liens, and even the threat of a lawsuit can push some people to cooperate.
In Illinois, the statute of limitations for debt collection depends on your original agreement with the lender. This means creditors and debt collectors have a limited window (explained below) to sue you for the debt. However, they can contact you via phone, mail or email indefinitely.
I’ve also written a blog post outlining how to use the statute of limitations to your advantage against collection agencies.
Deadline to File Lawsuit Only
This information is about deadlines to file a lawsuit only, not when the court makes a judgement of who’s right or wrong. If the creditor files the lawsuit before the time runs out, they’re good to go, and the lawsuit can move forward as usual. It’s like beating the clock – file on time, and things keep rolling.
Here are some common time limits:
Debts Related to Sale or Lease of Goods
A four-year statute of limitations applies to the sale or lease of goods, like a car, and includes the obligation to pay for these goods. This includes car repossession deficiencies for any leftover amounts owed after a car has been repossessed and resold. This category also encompasses items that may not be immediately associated with goods, such as water, natural gas, and heating oil. 735 ILCS 5/13-206
Contracts Entirely in Writing
Contracts that are entirely in writing have a statute of limitations of 10 years from the date of default. This includes payday loans. 735 ILCS 5/13-206. However, borrowers may have additional ways to challenge payday loans, particularly if the annual percentage rate (APR) exceeds the legal limit of 36%.
Contracts Not Entirely in Writing
A five-year statute of limitations applies to contracts not entirely in writing, like those associated with a credit card. This includes instances where written terms are sent to you, and your “acceptance” through card usage or other conduct is not considered a formal written agreement.
Credit Card Debt Statute of Limitations
In Illinois, the statute of limitations for credit card debts is 5 years. If your date of default is more than 5 years ago and you haven’t made any payments or had any contact with the creditor (or collection agency) during those 5 years, the statute of limitations has expired, and they cannot take legal action against you. If you are certain the debt has expired, do not make a payment as it can restart the statute of limitations clock.
Bad Check Penalties
A two-year statute of limitations applies to bad check penalties. It’s important to note that this pertains to the fees and penalties imposed by the bank for passing a bad check, not the debt created by writing the bad check itself.
Bounced Checks (Bad Checks)
A three-year statute of limitations applies to cases involving debt created by passing bad or bounced checks.
Legal Judgments
Court judgments have different enforcement periods depending on the type of debt:
- Consumer Debt Judgments: For consumer debt judgments entered on or after January 1, 2020, the enforcement period is capped at 17 years. This consists of an initial 7-year enforcement phase, followed by a 10-year revival period.
- Non-Consumer Debt Judgments: These judgments can be enforceable for up to 27 years. This period includes an initial 7-year enforcement phase, followed by a potential revival phase extending up to an additional 20 years if the judgment becomes dormant and is revived.
For all judgments, whether consumer or non-consumer, revival of debt is required after 7 years to maintain enforceability, as outlined in 735 ILCS 5/12-108
Additionally, the statutory interest rate on most legal judgments is 9%, calculated as simple interest, in accordance with 735 ILCS 5/2-1303
Debt Collection Lawsuits for 2nd Mortgages / HELOCS – Not Foreclosures
When it comes to Home Equity Lines of Credit (HELOCs), the bank has a five-year window from the date of default to file a lawsuit for debt collection.
Mortgage Foreclosures
In Illinois, a lender must file a foreclosure action within 10 years from the date the borrower defaults, per 735 ILCS 5/13-115.
Federal Government Student Loans
It’s important to note that federal student loans are an exception; they have no statutes of limitation. This means there is no set time frame within which legal action must be initiated to collect on these loans. Additionally, the Federal government can garnish your tax returns to satisfy student loan debts.
Private Student Loans
For private student loans, the statute of limitations varies, either 5 or 10 years, depending on the documentation associated with the loan agreement.
What are the Statute of Limitations on Car Repossessions in Illinois?
The time limits for how long you can be sued for debts don’t apply to car repossession. When you buy a car using a loan, the lender’s name is on the title, meaning they technically own the car until you finish paying. Even if you have possession of the title, if the lender’s name is on it, your debt is “secured.” Simply put, they own the car, you only have possession.
So, if your car debt is secured, and the lender has a claim on your car, you might wonder how long they can wait to take it back. Unfortunately, there’s no time limit because the laws about how long you can be sued don’t cover repossessions – they only apply to lawsuits over debts.
So, let’s say you manage to keep your car hidden from the repo man for five years. If they eventually find you, they can still take back the car, and yes, they can sell it. The law that sets a time limit for suing over vehicle debt is four years, but this doesn’t mean they can’t sue while they look for the car – in fact, that’s a likely scenario.
The main takeaway is this: if you’ve had a car for more than four years after missing a payment (without catching up), and you haven’t been sued on the debt or had the car taken back, it’s likely the lender doesn’t see it as worth the trouble.
Debt Collector Lawsuits After Statute of Limitations
Once the statute of limitations has passed, your unpaid debts are considered “time-barred.” In simpler terms, consider time-barred debts as expired—past their expiration date, old, rotten, and essentially worthless in the eyes of the law. While debt collectors may continue to contact you regarding these debts, they lack the legal right to sue you. If you’re uncertain about the status of your debt, you have the right to ask the collector, and they must truthfully answer. Another way to confirm is by requesting a record of your last payment, using its date as a “start date” to determine if you are within or beyond the statute of limitations.
Do I Have to Pay Expired or Old Debts?
Whether or not you pay a time-barred debt is entirely your decision. However, it’s advisable to consult with a collection defense attorney before making a choice. Remember, a collector cannot sue you for a time-barred debt, but they can still contact you to request payment. If you wish to stop this contact, sending a letter to the collector demanding communication cessation is necessary.
If you opt to start repaying the debt, be cautious—depending on your state, even a promise to pay might revive the debt, resetting the clock on the statute of limitations and enabling the collector to sue you again.
If you choose to settle the debt in full, some collectors may agree to a reduced amount. Ensure you have a signed, detailed document outlining the agreed-upon payment terms before making any payments, and always maintain records of your payments.
What to Do When Sued for an Expired Debt
If you’re served with a lawsuit notice on a debt you believe to be past the statute of limitations, don’t disregard it. Failing to appear in court and present your evidence that the claim is time-barred could lead to a default judgment in favor of the debt collector. Despite the original debt expiring, a default judgment can revive the monetary amount owed, creating a new obligation. Responding to court notices is crucial to avoid such judgments. If you’re unsure about the legal documents, consult with an experienced attorney specializing in collection matters.
Contact Steven Grace Law
Navigating the statutes of limitations in Illinois is a critical aspect of debt management for debtors. By understanding these limitations and potential legal actions, debtors can make informed decisions, defend their rights, and explore options for resolving outstanding debts within the confines of the law. Seeking legal advice, particularly from experienced attorneys like Steven J. Grace can be instrumental in addressing debt-related challenges.
