There is no statute of limitations on how long a creditor can attempt to collect an unpaid debt, but there is a deadline for when they can still use litigation to receive a court judgment against the debtor. Litigation has advantages over other debt collection practices because:

• The debtor is legally obligated to repay what they owe.
• Creditors can request methods of enforcing the court order, such as wage garnishment.
• The mere threat of litigation may be motivation for the debtor to cooperate.

If you allow the statute of limitations to expire on a debt, you are left with fewer options for collecting that debt. You must understand how the statute of limitations works to know whether it is too late to file a lawsuit over an outstanding debt.

What Is the Statute of Limitations?

The number of years you have before the statute of limitations expires is different depending on the state and type of debt. In Illinois, the statute of limitations is:

When creating a loan agreement in Illinois, there is a big difference between personal loans and commercial loans. Individuals or spouses take out personal loans in order to pay for family or household expenses – the most common example being home mortgages. Commercial loans are credit agreements made with business owners for the purpose of starting or expanding a business. In Illinois, commercial loans are more favorable to lenders than personal loans because of the Illinois Credit Agreements Act. Thus, making sure to classify a loan as a credit agreement could save you from a lengthy legal battle.

Commercial Loan Rules

The Illinois Credit Agreements Act states that a credit agreement or any revisions to an agreement is valid only if the agreement is in writing and signed by both parties. The law defines credit agreements as not including credit cards or loans for personal, household, or family purposes. The lender and the commercial debtor cannot create an agreement by:

• Discussing changes to an existing agreement;
• Reaching an oral agreement; or
• Sending a letter or email with the terms of the oral agreement.

Debtors try to use oral agreements to defend themselves against lenders who are attempting to collect on a loan or to file a claim against a lender that they accuse of violating their agreement. With credit agreements in Illinois, commercial debtors have no claim or defense based on oral agreements.

Illinois Gov. J.B. Pritzker is expected to sign a bill that will change the rules for collecting consumer debt after a debt judgment. The bill, which has passed both the Illinois Senate and House of Representatives, would reduce the interest rate charged to outstanding consumer debts. More significantly, the bill would cut by 10 years the amount of time that a creditor has to revive a judgment that has become dormant. Sponsors of the law tout it as a way to protect low-income Illinois consumers from cumbersome debts. Creditors of Illinois debtors may need to work faster to collect on court-ordered debt judgments.

Qualifications

There are two important caveats of the law as it applies to debtors. The changes affect debt judgments only if:

• They involve consumer debts; and
• The debt is $25,000 or less.

Consumer debts are debts accrued by individuals for personal, family, and household expenses. Nonconsumer debts are debts from an organization or business or debts that an individual accrues for purposes other than their personal expenses.

The debt that someone owes you does not disappear when he or she dies. Instead, you can turn your collection efforts towards the deceased debtor’s estate. Creditors have a deadline to file a claim against a debtor’s estate and collect compensation from the estate before the debtor’s beneficiaries inherit the assets. You may lose your ability to collect your debt if you miss the deadline. You must know who you may contact about the debts, who can be liable for the remaining debts, and how quickly you will need to file a probate claim.

Contact

The representative of the debtor’s estate handles all contact with creditors about claims on the estate. Once you know who the representative is, you are not allowed to contact the debtor’s family members. In many cases, the representative will notify you of your debtor’s passing and your right to file a probate claim against the estate. The representative could also send you a letter to cease contact because there are no assets in debtor’s estate to repay you. After receiving this letter, you are not allowed to contact the representative unless you are filing a lawsuit to dispute the claim of no assets.

Liable Parties

In most situations, personal debt does not transfer to another person when the debtor dies. However, there are exceptions that make family members liable for the debts, including:

Obtaining a judgment order against a debtor gives you the authority to enforce your debt collection. However, your debtor may continue to fight your collection efforts, based on legal technicalities and new claims. Thus, the legal battle against your debtor is not finished until you have received the money you are owed.

Recent Case

In MI Management v. Proteus Holdings, the plaintiff is a creditor who appealed multiple Illinois circuit court decisions that:

• Quashed garnishment orders against a debtor;
• Vacated a third-party citation to discover the debtor’s holdings in a bank; and
• Granted a third-party creditor’s adverse claim to the debtor’s holdings.

In 2014, the plaintiff received a favorable judgment against two individual debtors and their company for breach of a $1.25 million promissory note. The plaintiff issued wage and non-wage garnishment summons against the debtors, who did not respond or appear in court. The court granted conditional garnishment judgment orders, which were later confirmed after the debtors continued to not respond. The plaintiff issued citations to discover assets to the debtors and their bank.