The statute of limitations for collecting on a defaulted promissory note or foreclosing on the mortgaged property is ten years, though slightly different statutory provisions apply in either case. If you are collecting on the promissory note, the statute of limitations is ten years after the claim accrues. If you are foreclosing on the mortgaged property, the statute of limitations is ten years after the right to foreclose or hold a foreclosure sale accrues. However, other factors could extend or shorten these limitations periods. For example, the limitations period could be lengthened if the borrower makes any payments or enters into a new, written promise to pay. Also, if the borrower moves out of state, the limitations period could be lengthened once the borrower returns.

Other statutory provisions apply after your organization has obtained a judgment against the borrower, limiting the time frame in which you must take action to enforce the judgment. A judgment can be enforced for up to seven years from the date it was entered, and you may “revive the judgment in the seventh year after its entry, or in the seventh year after its last revival, or in the twentieth year after its entry, or at any other time within 20 years after its entry.”

We are not aware of any requirement to notify a borrower that you will continue to collect on a delinquent mortgage loan after charging it off. Of course, your mortgage agreements may impose other notice requirements.

We believe you should discontinue reporting a loan after seven years have passed since the charge-off. Once seven years have passed after a delinquent loan has been charged off, the Fair Credit Reporting Act prohibits consumer reporting agencies from reporting on the loan.  

For citations related to our guidance, please see:

• Illinois Code of Civil Procedure, 735 ILCS 5/13-206 (Actions on promissory notes “shall be commenced within 10 years next after the cause of action accrued; but if any payment or new promise to pay has been made, in writing . . . within or after the period of 10 years, then an action may be commenced thereon at any time within 10 years after the time of such payment or promise to pay.”)

• Illinois Code of Civil Procedure, 735 ILCS 5/13-115 (“No person shall commence an action or make a sale to foreclose any mortgage or deed of trust in the nature of a mortgage, unless within 10 years after the right of action or right to make such sale accrues.”)

• Illinois Code of Civil Procedure, 735 ILCS 5/13-208 (“. . . if, after the cause of action accrues [against a person], he or she departs from and resides out of the state, the time of his or her absence is no part of the time limited for the commencement of the action.”)

• Illinois Code of Civil Procedure, 735 ILCS 5/12-108 (Seven-year statute of limitations on enforcing a judgment.)

• Illinois Code of Civil Procedure, 735 ILCS 5/2-1602(a) (“A judgment may be revived by filing a petition to revive the judgment in the seventh year after its entry, or in the seventh year after its last revival, or in the twentieth year after its entry, or at any other time within 20 years after its entry if the judgment becomes dormant.”)

• Fair Credit Reporting Act, 15 USC 1681c (“No consumer reporting agency may make any consumer report containing any of the following items of information: . . . (4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years. . . .”)