The Law

• The statute of limitations on debt in Arkansas is established according to Arkansas state law and varies depending on what type of debt it is. For example, written contracts have a statute of limitation of six years, but oral contracts have a statute of limitation of three years. For promissory notes, the statute of limitation is five years and for open accounts, or accounts with a changing balance such as a credit card, the statute of limitation is three years.
  
  

Significance

• The statute of limitations is important because within this time frame, a creditor or debt collection agency can sue you in court for the outstanding amount plus fees and interest. If the creditor prevails, the court will issue a judgment against you. This judgment will give the creditor the right to garnish your wages and seize money in your bank account. The creditor can also place a lien on any personal property that you own.
  
  

Considerations

• Just because you're judgment proof now, meaning you don't own or have any assets, doesn't mean the creditor can't collect from you in the future. Once entered, a judgment has a statute of limitation all its own. In the state of Arkansas, the statute of limitations on judgments is 10 years with a maximum interest rate of 10.5 percent. So the creditor has up to 10 years from the date the court issued the judgment to pursue collection activity against you and during this time, the judgment is accruing interest, which means the longer it takes you to pay it off, the more money you will owe on that debt.
  
  

Warning

• Some collection agencies purchase old debt, known as zombie debt, in an attempt to get consumers to pay it. Zombie debt is debt that has passed the state's statute of limitations, which means you're no longer legally responsible for paying it; however, consumers who do not know that may be tricked into paying it nonetheless. Also, some agencies will sue you in court for zombie debt, hoping you don't appear. If you do appear and inform the judge that the debt is expired, he will dismiss, but if you fail to appear, the agency will receive a default judgment against you, which is the aim of such lawsuits. A default judgment makes you legally responsible for paying the debt. Never ignore a court summons or collection notice.