The Statute of Limitations for written contracts (debts included) is four years. However, if the hospital debt was somehow related to a federal funding or subsidy then federal law may be involved. If so, then I don't know what the Statute of Limitations would be. Your second question is correct. If the creditor did not initiate legal action within the time alloted by law, then he/it loses all rights in that debt.
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Mark B. Replogle