This text has undergone thorough fact-checking to ensure accuracy and reliability. All information presented is backed by verified sources and reputable data. By adhering to stringent fact-checking standards, we aim to provide you with reliable and trustworthy content. You can trust the information presented here to make informed decisions with confidence.
In Michigan, the statute of limitations for most consumer debts is six years, starting 30 days after the last payment or default. For credit card debts involving the sale of goods, a four-year limit applies. Once the statute expires, creditors cannot sue, but the debt remains valid. Court judgments extend the collection period to 10 years, renewable indefinitely. Actions like partial payments or written acknowledgments can reset the clock, making expired debts collectible again. Buyers and collectors must verify debt timelines to avoid legal risks, including violations under the Fair Debt Collection Practices Act (FDCPA). Failure to comply can lead to penalties, emphasizing the importance of compliance and careful portfolio evaluation.
Michigan Debt Collection Statute of Limitations by Debt Type
In Michigan, most consumer debts are subject to a six-year statute of limitations, as outlined in MCL 600.5807. This timeframe applies to various debt types, including written contracts, oral agreements, promissory notes, open accounts, and medical bills. The clock starts ticking 30 days after the last full payment or the default date. Once six years pass without legal action, creditors lose their ability to sue, although the debt itself does not disappear.
For those dealing in debt portfolios, this six-year limit is a critical factor. If a portfolio is nearing the end of this period, its enforcement options are limited, which can significantly affect its market value. Buyers need to carefully verify the date of last activity to avoid purchasing debts that are no longer enforceable through legal channels.
Different types of debts, however, come with varying time limits.
Debt types don’t all follow the same rules. For instance, credit card debt is generally treated as an open account with a six-year limit. However, in cases involving credit card transactions related to the sale of goods, Michigan case law - Fisher Sand and Gravel Co v Neal A. Sweebe, Inc. - establishes a four-year limit under MCL 440.2725. This shorter period pushes creditors to act more quickly.
When it comes to court judgments, the rules change. If a creditor wins a lawsuit and obtains a judgment, they have 10 years to enforce it under MCL 600.5809. Judgments can also be renewed every 10 years, which allows creditors to continue pursuing collection through methods like wage garnishment or property liens. This extended enforceability often makes judgment-based portfolios more attractive in the market.
Here’s a quick look at Michigan’s limitation periods for different debt types:
| Debt Type | Statute of Limitations | Relevant Michigan Law |
|---|---|---|
| Written Contracts | 6 years | MCL 600.5807 |
| Oral Contracts | 6 years | MCL 600.5807 |
| Medical Debt | 6 years | MCL 600.5807 |
| Credit Card Debt | 4 years | MCL 440.2725 |
| Open Accounts | 6 years | MCL 600.5807 |
| Court Judgments | 10 years (renewable) | MCL 600.5809 |
| Motor Vehicle Installment Sales | 4 years | N/A |
| Mobile Home Sales | 3 years | N/A |
Understanding when these time limits begin - or reset - is just as important for evaluating a debt portfolio’s potential.
The statute of limitations typically begins at the point of breach - usually 30 days after the last full payment. For court judgments, the clock starts on the date the judgment is issued.
Certain actions can reset the six-year period. For example, a partial payment or a written acknowledgment of the debt restarts the clock. Debt buyers should pay close attention to these revival events, as they can restore enforceability to debts that are nearing expiration. However, collection agencies need to tread carefully - pushing for partial payments on nearly expired debts can lead to violations of the Fair Debt Collection Practices Act (FDCPA).
There’s also the matter of tolling, which pauses the statute of limitations if the debtor leaves Michigan. Time spent out of state doesn’t count toward the limitation period, potentially giving creditors more time to act.
In Michigan, the date of last activity (DLA) plays a key role in evaluating debt portfolios. This date determines how much time remains for legal enforcement of a debt. For example, if a portfolio's DLA is February 2021, it would only have about one year of enforceability left, which directly impacts its market value.
Portfolios containing judgments are often more appealing to buyers because judgments in Michigan remain enforceable for 10 years and can be renewed for additional 10-year periods. Acclaim Legal Services explains:
By getting a judgment, your creditor can pursue collections (likely a garnishment) almost indefinitely as long as they renew the judgment every 10 years.
This extended enforceability makes judgment-heavy portfolios a more stable and attractive investment compared to standard debts without judgments.
Buyers also need to look for restart events, such as partial payments or written acknowledgments, which can reset the six-year statute of limitations. Proper documentation of these events can increase a portfolio's value, even if the original default occurred years ago. Understanding and identifying these events is essential to minimize risks, which are discussed below.
Debts that exceed the statute of limitations lose their legal enforceability and are sold at much lower prices. Attempting to collect on these expired debts by filing lawsuits can violate the Fair Debt Collection Practices Act (FDCPA), potentially leading to penalties of up to $1,000 per violation, plus attorney fees.
In Michigan, the statute of limitations is also an affirmative defense. Acclaim Legal Services elaborates:
If you ignore the notice of complaint, your creditor can obtain a deficiency judgment to renew collection efforts even if it has been past the six years.
This means that if a debtor does not actively raise the statute of limitations as a defense, creditors may still secure a judgment, posing legal risks for buyers of time-barred debt.
Additionally, the Michigan Collection Practices Act (MCPA) imposes penalties for violations. Buyers could face actual damages or a minimum of $50 per violation, with the possibility of triple damages for willful misconduct. These risks highlight the importance of strict compliance when dealing with aged debt.
To navigate these challenges, compliance technology is crucial. Debexpert offers tools that help traders stay within Michigan's debt collection regulations by verifying and documenting critical dates.
Debexpert's platform simplifies compliance by providing transparency in portfolio documentation. Traders can filter portfolios based on enforceable timeframes - six years for most consumer debts and four years for sale-of-goods contracts. Sellers can securely share files documenting key dates, such as the last payment, written acknowledgments, and judgment renewals. This ensures buyers can confirm enforceability before making a purchase.
For portfolios with judgments, it’s vital to verify that renewals have been properly executed within the required 10-year period. Debexpert’s analytics tools also assist buyers in pricing portfolios accurately, balancing the risks of time-barred debt against potential returns. By using these tools, traders can focus on enforceable, higher-value accounts while reducing compliance risks, leading to better portfolio performance overall.
Debt collection in Michigan operates under strict federal and state regulations, ensuring both legal compliance and the protection of investments in debt portfolios. The Fair Debt Collection Practices Act (FDCPA) and the Michigan Collection Practices Act (MCPA) are the primary laws governing these activities.
Under these rules, debt collectors must send a written notice to the debtor within five days of their initial contact. If the consumer disputes the debt in writing within 30 days, all collection activities must pause until the collector provides written verification of the debt. This verification must include proper documentation addressing common defenses like "debt already paid" or "incorrect amount".
Michigan law also requires specific agreements to be in writing for enforceability, such as contracts for the sale of goods valued at $1,000 or more. Debt buyers must also verify the date of last activity before purchasing a portfolio. This date determines whether the debt is still within the statute of limitations, which varies depending on the type of debt:
Filing a lawsuit on a time-barred debt violates the FDCPA. Once a judgment is obtained, creditors must wait 21 days before requesting a Writ of Garnishment, allowing debtors time to arrange payments.
These legal safeguards are designed to reduce disputes and ensure fairness in the debt collection process.
Minimizing legal disputes in debt collection requires meticulous documentation and verification at every step. Before initiating any collection activity, confirm the debt type and ensure it falls within the applicable statute of limitations. Using certified mail with a return receipt creates a clear and verifiable paper trail.
It’s also essential to understand affirmative defense rules. In Michigan, the statute of limitations is an affirmative defense, meaning that if a collector sues for a time-barred debt, the debtor must actively raise this defense in their court response. Collectors must respect communication boundaries, such as ceasing work-related calls if notified that such calls are prohibited. Additionally, they must honor written cease-contact requests, except for two specific instances:
When handling garnishments, collectors need to identify and exempt protected funds, such as Social Security benefits, VA benefits, unemployment compensation, and pensions covered by ERISA. Michigan law also caps wage garnishment for child support and maintenance at 25% of disposable income.
In Michigan, the six-year statute of limitations on most consumer debts - and potentially four years for credit card debt - plays a key role in shaping how debt portfolios are valued and managed. This timeframe establishes the legal boundaries for pursuing collections and defines the level of risk collectors face.
"The statute of limitations acts like that invisible finish line, protecting you from legal action after a specific period." - Hammerschmidt Stickradt & Associates
It's crucial to differentiate between time-barred debt and debt backed by a court judgment. If a creditor obtains a judgment, the collection period extends to 10 years, with the possibility of indefinite renewals. However, attempting to sue for time-barred debt violates the FDCPA and can result in legal consequences.
Before acquiring a debt portfolio, verify the date of the last activity. Actions like partial payments or written acknowledgments can reset the six-year statute of limitations, making previously unenforceable debts collectible again. These considerations are critical when assessing a portfolio's potential, especially since the statute of limitations serves as an affirmative defense in legal disputes.
To determine the “date of last activity” on a Michigan debt, start by reviewing the account or credit report associated with it. This date typically reflects the most recent payment, charge, or acknowledgment related to the debt. You can find this information by checking your credit report, examining account statements, or reaching out to the creditor directly. Keep in mind that actions like making a payment or acknowledging the debt can restart the statute of limitations, so it’s crucial to verify the most recent activity with care.
The statute of limitations for debt in Michigan isn’t paused if you move out of the state. Whether you stay in Michigan or relocate elsewhere, the clock keeps ticking on the time limit as originally set.
In Michigan, the clock on the statute of limitations for debt can restart if there’s a new payment, settlement offer, or acknowledgment of the debt - sometimes even through a phone call. These actions can reset the legal timeframe for creditors to pursue collection. Be mindful, as even minor actions might unintentionally affect the timeline.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
.svg){kind=icon}
.svg){kind=icon}
.svg){kind=icon}
