Melissa Lyken
May 07, 2021
Summary: Being sued for an old debt in Alabama? It might be too late for the creditor to do anything about it. Learn about the statute of limitations and how to beat debt collectors in Alabama.
Do you have an old unpaid debt in Alabama? Your creditor may be able to file a collection suit against you for breach of contract. If you recently received a demand letter from your creditor, make sure you know where you and your possible defenses stand before making any payments or promises. One important defense to be aware of is the statute of limitations on debt.
The statute of limitations refers to the length of time a creditor or debt collector can demand and collect payment from you. After the statute of limitations has lapsed, your creditor can no longer file any collection lawsuit against you. They can also no longer use any other judicial method to pursue and collect what you owe them.
See below for more information about the statute of limitations for debt collection in Alabama.
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Alabama Statute of Limitations |
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|
Debt Type |
Deadline in Years |
|
Sealed |
10 |
|
Written |
6 |
|
Oral |
6 |
|
Open Account |
3 |
|
Breach of Contract |
4 |
|
State Tax |
3 |
|
Judgment |
10-20 |
|
Source: Findlaw |
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The statute of limitations for debt in Alabama depends on the kind of debt. There are only two categories of debt in Alabama that are enforceable: debts based on contracts and accounts. The statute of limitations is thus different depending on the kind of contract or account that you owe.
The debt may either be based on a written or oral contract, an open account, promissory note, mortgage, or any other form of loan. Moreover, if your creditor obtains a favorable judgment, the judgment has its statute of limitations. Keep reading for the various statute of limitations for debt in Alabama:
When your debt is based on a contract under seal, your creditor has ten years to file a collection lawsuit against you.
A sealed contract is a formal written agreement that states each party's promises and is not required to have a consideration. It must be signed by both parties, have a seal, and be delivered to both parties. After all three requirements are complete, the sealed contract is officially a conclusive document between the parties.
Promises in writing not under seal or comprising a simple contract have a six-year prescriptive period. Your creditor must file a collection lawsuit to collect your debt within six years from the time you defaulted. Otherwise, your debt will be time-barred.
Unlike a sealed contract, to be valid, a written contract must have stated a valuable consideration. It does not have to bear a seal. It is valid and enforceable when both parties have signed the contract. An example of a written contract could be medical debts, lease contracts, or any other agreement made in writing and signed by both parties.
An oral contract or verbal agreement between the parties is legally binding and has a statute of limitation of six years.
If your debt arises from a loan such as a personal loan or a stated account, your creditor is granted a six-year statute of limitations.
If your debt is an open account, such as an unpaid outstanding balance on your credit card, your creditor or the debt collector may file a collection lawsuit against you within three years from the time you defaulted on paying your balance.
In Alabama, the default prescriptive period for a breach of contract of sales is four years. This period may be reduced to no less than one year and no more than four years if agreed by the parties. Debts from auto loans also fall under this category.
The state has three years to audit your tax return and access any additional tax, penalty, or due interest from the date a tax return is filed or due, whichever comes later. After the said three-year period, the state can no longer pursue you for any tax deficiencies.
A judgment on debt may be enforced within ten years after entry. However, suppose the judgment will not be successfully satisfied within the ten years. In that case, the judgment creditor may file for the revival of the judgment before the ten-year period ends and have it enforced for the next successive ten years. Therefore, a judgment in Alabama may be enforced for 20 years.
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Another important principle to note when considering the prescriptive period is whether the debtor or defendant is in Alabama. The period in the statute of limitations will only begin when the defendant is present in Alabama. The time may also be interrupted by the defendant's subsequent absence. The time that they were not in the state will not be included when calculating the period of the permissible time for filing a collection lawsuit.
If your debt passes the period given in the statute of limitations, and your creditor did not file a collection lawsuit, they are barred from pursuing a legal remedy to collect. You still owe the creditor, but they can no longer ask the court to garnish your wages or levy your property to satisfy your debt.
The exception to this is when you make a partial payment or an unconditional promise in writing signed by both parties, as this action will result in the statute of limitations restarting. As such, your creditor may be able to file a collection lawsuit and pursue the collection of your debt via another legal remedy.
Understanding all of the laws regarding statutes of limitations on debt can be burdensome. However, you must be familiar with the statute of limitations if you seek to provide this defense against your creditor or debt collector. If the statute of limitations has not expired on your debt, you should consider other defenses that may apply to your case.
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>>Read the NPR story on SoloSuit: A Student Solution To Give Utah Debtors A Fighting Chance
Here's a list of guides for other states.
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