Get off my lawn! That’s the type of reaction most would have when paid a visit by a debt collector, and it’s completely understandable. But while unleashing some frustration on your creditors will certainly feel good, it won’t protect you from a lawsuit, which a debt collector will likely file if you owe more than a couple thousand dollars and have defaulted on your payments. There are a few steps you can take to prevent a suit, however, or at least decrease the likelihood of one.

It all starts with understanding the statute of limitations for written contracts, which dictates, among other things, how long credit card and loan agreements are legally relevant. You see, each state has a proscribed window for when creditors can sue you for amounts owed and actually win. After this window closes, your debt becomes time-barred, and as long as you inform the courts of this designation, any suit against you will be thrown out.

Though the exact length of time can be from 3-15 years, depending on the state, the clock always starts at the time of your last payment. This, of course, means that it resets each time you make a payment, but you should not mistake this as an invitation not to pay. Waiting out your state’s statute is a last resort not only because it makes you extremely vulnerable for a matter of years and may mean pushing back your retirement date, but also because there are a number of other avenues to explore first.
First, try to reach a mutually-beneficial payment agreement with your creditor. Creditors just want to get paid, so if you make clear your desire to get them their money, but express that doing so will not be possible with your current required monthly payments, they might work with you. The key is to be polite, calm and willing to explore every option, as they deal with so many unpleasant, demanding people every day. What’s more, do not agree to make monthly payments that you cannot sustain; doing so will only complicate matters and may even increase the likelihood that you’ll be sued in the long term.

The two most common types of amended payment agreements are:
• Debt Management: This usually entails your creditor waiving interest and fees in order to create a more manageable monthly payment than your original agreement provided for. Debt management is also good in the sense that it gives you a clear line of site to debt freedom.

• Debt Settlement: This involves paying a lump-sum portion of your debt in return for the rest of it being forgiven, and as such, most seriously indebted folks won’t be able to swing it. However, the benefits are obvious: your debt problems will be solved immediately and you’ll end up paying back significantly less than you borrowed. If you owe more than $10,000 to any one creditor and the chances of a suit are therefore high, you might even want to consider borrowing from your retirement plan in order to pay off what you owe at 50% of its face value and thereby remove the risk of being sued for the full amount. Keep in mind that forgiven debt can be taxable.

Should you be unable to reach an agreement with your creditor and you really gave it the ole college try, then it might be worth hearing what a bankruptcy attorney has to say. Now, before you immediately balk at this suggestion, keep in mind that many bankruptcy attorneys offer free consultations. Depending on your exact situation, bankruptcy might be the least harmful option remaining. You don’t want creditors coming after your pension, company retirement plan, etc., and the credit score damage you incur can be repaired over time via use of secured credit cards.

If bankruptcy too is a dead end, then it might finally be time to play the waiting game. This obviously is a better option for people living in places on the low end of the statute of limitations range – such as Alaska, D.C., Maryland, Mississippi, New Hampshire and the Carolinas, which all have three-year statutes – than those living in places on the high end – such as Kentucky and Ohio, which both have 15-year statutes.

This article was written by Odysseas Papadimitriou, founder and CEO of Card Hub, a leading online resource for credit cards and debt help.

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