Collecting Debt in Pennsylvania

"Neither a borrower or a lender be." This was a famous quote deriving from Shakespeare's classic tragedy Hamlet. Now, while Shakespeare was a truly brilliant playwright, his knowledge of economics and finance was weak. After all, if no one was lending or borrowing money then the world economies would collapse. Of course, the economy can also collapse if no one pays back the money they borrow. That is why there are specific laws written for the collection of debt.

The word "debt" is a catch all term. That is why it is important to provide a clear legal definition of debt. Additionally, it is important to provide clear examples of the type of debt people accrue that have actual standing under the law. Illegal gambling debts, for example, can not be legally recovered as they are not valid debts under the law. The same can be said of any debt deriving from illegal activities. So, let's examine what legitimate debt is, how it is defined, and what laws govern the rules of collection.

Debt is the obligation to pay a past due monetary amount to an individual or entity that has become overdue. Debts can derive from a legal judgment/fine, a loan, a mortgage, credit card balances when payments are not made. That is, if you are obligated to pay something in the future, this would not be a debt until it is past due. For example, if you are obligated to purchase three books from a book club within a two year period, the obligation would not be considered a debt. However, once the two years expires and you have not made the purchased, you are now in debt for the minimum monetary amount of three books. As a result, the book club can now seek to collect the debt. However, they could not seek to collect a payment prior to the two years expiring, because the member would not yet be in debt.

When debt is not paid it can harm the finances of the creditor irreparably. That is why there are legal recourses available for creditors to sue for the collection of debt. However, there are also statutes of limitation in place which restrict the deadline to sue for collection. These statutes of limitation vary depending upon the type of debt owed.

Pennsylvania Statute of Limitations

Specifically, there are four categories of debt collections and each has their own statute of limitations under Pennsylvania law. Oral agreements carry a four year statute of limitations while written agreements carry a six year statute of limitations. Contract notes such as mortgages carry a four year limitation and open accounts such as credit cards carry a six year limitation. Once these statutes expire the ability to sue to collect the debt is lost. However, the creditor can still request payment but without the potential for punitive action recovery may prove elusive.