What's the Statute of Limitations on Debt in Texas?

As a small business owner, you must have an effective system for collecting money people owe you. Knowing the laws governing how long you have to pursue your outstanding debt legally is especially important. This article will explain the statute of limitations for collecting debts in Texas.

You have a deadline to take an unpaid debt to court.

The statute of limitations on debt is a deadline to take legal action to collect debts. In Texas, this deadline is four years for most types of debts. Once the time limit expires, the creditor cannot sue the debtor for the unpaid amount. Suppose you provide a product or service to a client, but they do not pay you. If four years go by without the payment, you can no longer use legal action to make them pay.

Knowing about the statute of limitations is just the start for small businesses in places like Houston and Dallas. You must also have a sound system for keeping track of your debts. You can use basic spreadsheets or more advanced accounting programs to do this. The goal is to maintain a clear record of debts so they do not become impossible to collect because too much time has passed according to the statute of limitations.

Taking quick action on overdue accounts is crucial.

Usually, businesses start debt collection after an account has not been paid for 30 days. At first, friendly reminders might work. But if no payments are made after 180 days, hiring a professional collection agency in Dallas or Houston would be a good idea. These agencies have in-depth knowledge of Texas debt collection laws and can help you recover your debt legally and efficiently.

Keep in mind that once a debt is older than four years, it is considered time-barred under Texas law. While it does mean you cannot take legal action to collect your debt, you do not have to cease your collection efforts entirely. Collection agencies can still ask the debtor to pay but cannot legally enforce the payment through court. Knowing this difference helps creditors save time on legal actions that cannot be enforced.

You must also know the difference between the statute of limitations for collecting a debt and the time limit for reporting the debt to credit bureaus (usually seven years). These two time limits follow different rules—one is about how long you have to recover your debt legally, and the other is how long you can report someone's unpaid debt to credit agencies.

Final thoughts

For small businesses in Texas, staying informed about the statute of limitations on debt is crucial. When you keep your accounting in order, maintain good records, and know when to escalate to recover the money you are owed, you can handle debt collection well within the state's laws.

If necessary, seeking trusted credit collection services in Dallas or Houston can help you recover debts before it is too late to do so legally. Remember that to recover your debts successfully, you should not only know the laws but also use smart and quick ways to manage and recover outstanding debts.