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Statute of Limitations on Debt Collection Action in Texas

The Texas civil practices and remedies code sets the statute of limitations on a breach of contract for a debt, either in writing or oral for 4 years. (See Tex. Civ. Prac. & Rem. Code § 16.004(a)(3)).

This means that from the time of the last payment by the debtor, the creditor has 4 years to file a lawsuit to obtain a judgment on the debt. However, even after the debt has surpassed the 4-year limitation, that doesn’t necessarily mean that you don’t need to worry about it any longer. There are many nuances to this rule that can cause issues for debtors who are straddled with debt.

First, the statute of limitation is a defense. This means that a creditor can still file a lawsuit even if the 4 years have passed. It is then up to the debtor to plead that the debt is past the statute of limitations. If the debtor doesn’t answer the lawsuit the creditor may still get a default judgment, and it can be costly to go in after the fact to get it reversed.

The statute of limitations starts from the time the debt defaulted. Defaulted means from the last time the debt was paid. So a debt may be more then 4 years old, but if you make a payment then that will reset the clock on when the statute runs. This includes a settlement payment if you try to work something out with a creditor.

Debt information will remain on your credit report for up to 7 years. Even if your debt has past the statute of limitations, the debt will still affect your credit score. The credit reporting agencies will list the debt for up to 7 years and this can result in a negative credit score.

Most creditors will file a lawsuit well before the statute of limitations runs, especially if the debt amount is high. This is because most creditors know the statute of limitations and want to make sure that they do not become time barred from filing.

The strongest aspect of the statute of limitations is that it stops a creditor from pursuing a judgment on a debt after the limitations have ended. This means that the creditor will never be able to attach their judgment on any of the debtor’s property, and they cannot get a court to enforce it.  Also, if a debtor were to file a chapter 13 bankruptcy, the statute of limitations can prevent the creditor from being paid out by the chapter 13 plan payment. If you have an old debt that is ruining your credit, or if a collector is harassing you, contact the experienced attorneys at Fears Nachawati Law Firm at 1.866.705.7584. We offer a free 60 minute consultation and will review your debts with you to determine what the best course of action is.