Time Frame

• Your state's statute of limitations for debt collection lawsuits determines whether a given creditor has the right to sue you. State laws differ, but most statutes of limitations fall within the four to six year range. MSN Money notes that after the statute of limitations passes, your creditor still retains the right to pursue you for the unsecured debt you owe, but it loses its right to file a lawsuit against you.
  
  

Considerations

• Although the law doesn't permit creditors to file lawsuits after your state's statute of limitations passes, that does not mean that your creditor won't do so. If you do not respond to the summons and use the statute of limitations as a defense against the lawsuit, the court will grant your creditor a default judgment. The judge at the hearing has no way of knowing that the statute of limitations on the debt has already passed unless you bring it to his attention.
  
  

Effects

• Some states give creditors who win a judgment against a debtor in court the right to place a lien against the debtor's assets. Creditors can secure a previously unsecured debt through a property lien. If a creditor places a lien against your home, for example, you cannot refinance the property without first paying off the debt. Although you can legally sell property that carries a lien, most lenders won't grant a buyer a loan to purchase your home until you pay off any outstanding liens. Creditors can also use their court judgments to garnish your bank accounts and wages.
  
  

Features

• A lawsuit is a risk you face when you stop making payments on your unsecured debt -- but it isn't a certainty. New York's Neighborhood Economic Development Advocacy Project notes that lawsuits are expensive for creditors, and many pick and choose their lawsuits carefully. In general, you face a greater risk of being sued if you owe more than $1,000 or the creditor in question has a history of frequently suing debtors.
  
  

Prevention/Solution

• Some creditors will drop a pending lawsuit if you make payment arrangements before the hearing date. If you have a solid defense, such as an expired statute of limitations in your state, you can also appear in court and fight the lawsuit. If you choose to actively contest the lawsuit, your creditor must prove in court that you actually owe the debt. Not all creditors are capable of doing this -- especially if the debt has been sold repeatedly.