Statute of limitations on credit card debt.
Find the statute of limitations on credit card debt by state. Learn how much time a bank, company or lender has to collect the money from you. If you do stop paying your bills, this is where Statutes of Limitations will come into play and maybe even help you. The laws are meant to help protect consumers. Find how the process works and how long the statutes of limitations for credit card debt is below.
Running up credit card debt can happen quickly. If your bills go unpaid, then the Statutes of Limitations for your state will help with addressing old, unpaid debt. Each state has their own rules, laws, and regulations.
When a family has a financial crisis, such as job loss, divorce, death in family, reduction in income, etc. more people are being forced to take on debt to provide basic necessities. While most people use their credit cards with the intent to eventually pay it off, sometimes the debt becomes insurmountable and people simply stop paying.
What happens to old credit card debt?
Credit card companies (which are often banks) often wait at least six months before initiating a lawsuit to collect. Or they “sell” your unpaid debt to a third party, such as debt collection agency. Some banks frequently wait much longer or may never start a lawsuit.
Delinquent credit card accounts are typically sold as a package to collection agencies that may later sell them to yet another agency. It is common for a single delinquent account to be passed between half a dozen collection agencies and legal offices. Rather than starting legal action, the agency will first send the debtor a letter threatening a lawsuit. This may be followed up later with a written offer to settle the debt for payment of a reduced amount.
This process may continue for years as the delinquent account passes from collector to collector. At some point, an agency may initiate a lawsuit to collect by sending the debtor a summons and complaint. If you receive such a notice, you should not ignore it. Failure to respond can result in a default judgment being obtained against you that grants everything requested by the collection agency. You can even look into your own free or low cost attorney or non-profit counseling agency to assist you.
Responding to a lawsuit allows you to raise specific defenses, one of which is that the statute of limitations (SOL) has expired and prohibits a creditor from suing you to collect. Every state has a variety of statutes of limitation. Among them is a limit of the number of years during which a lawsuit based on a written contract may be started. Credit card accounts are issued based on written contracts regardless of whether the contract is signed personally or electronically.
How Statutes of Limitation (SOL) for debt operate
The applicable SOL varies by state from three years to as long as 15 years. States with 3-year limits include Maryland, New Hampshire, South Carolina and Mississippi. A 6-year limit is far more common and exists in 24 states, including Alabama, Connecticut, Hawaii, Maine, New York, New Jersey, Utah, and Washington. Seven states have a 10-year limit, and Kentucky has the longest limit of 15 years. Find a list of SOLS by state below.
The statutory time limit begins to run on the date of your most recent payment. Generally, if you have not made a payment during the applicable period, legal action is deemed to be time-barred once the specified time has passed. A company may still try to bring a lawsuit, but if you can show the limitation period has expired, the suit will be dismissed.
The statute of limitations has no effect once judgment has been ordered. Once a creditor obtains a judgment as the result of bringing a lawsuit, collection efforts can include garnishing wages and bank accounts and can often continue for ten years or longer. To use the statute as a shield, you must raise the issue in a legal proceeding before a court grants a judgment against you.
In many cases, a creditor will never start a lawsuit. It is more likely that an agency holding the debt will send repeated letters threatening to bring a suit and offering to settle the debt. The longer the debt goes unpaid, the better the offers tend to get. Collectors prefer to avoid the cost of filing a lawsuit and rely on the hope that a debtor will eventually pay even a minimal amount of the debt.
It is not uncommon for the entire limitation period to pass without a lawsuit ever being started. Once the time passes, debt collectors have virtually no power over you. You cannot be sued and you should not be coerced into making a payment.
Restarting the Limitation Period
If communication from a collector is ignored, other than responding to an actual lawsuit, the bar on lawsuits will become effective when the specified SOL period has passed. However, several actions can restart the Statutes of Limitations clock even if the action takes place the day before the period is due to expire.
If the statutory limitation period is three years and you make a payment 35 months after your last payment, the full three year period starts over. The limitation period may also be reset by simply signing a written agreement to begin a payment plan or even by verbally advising a collector you will sign such an agreement. To be certain that the limitation period runs, you must not take any action that may be seen as an agreement to pay some or all of the debt.
Even after a lawsuit has been time-barred, collectors may continue to send letters offering to settle the debt for payment of a small amount, but very often those letters will acknowledge that you cannot be sued for the debt. These letters can be ignored without consequence.
Credit Reports
Even if you are never sued for an old credit card debt or escape liability via the statute of limitations, the bad debt will appear on your credit report for seven years. If maintaining a good credit score is important to you, it may be wise to proactively deal with the debt in some other way by working with a credit counselor or a debt management company. This can be done before, after, or during the Statutes of Limitations process.
After seven years, the bad debt will fall off your credit report and will no longer negatively affect your credit score. Until the unpaid debt is removed from the report, obtaining new credit will likely prove difficult.
Statutes of Limitations are meant to help
For a person with a history of responsibly paying off debt, using a statute of limitations to avoid liability may feel irresponsible. Lawyers can help debtors navigate the process. However, limitation statutes exist in state laws for a reason. These states selected SOL to protect consumers as time goes on. Find additional free lawyers for consumer debt issues.
Society and lawmakers have decided that certain potential civil and criminal liabilities should not indefinitely interfere with people's lives. At some point, people need to feel free to put specific actions or inactions behind them, and at the end of the day this is what Statutes of Limitations are meant to do and assist. When it comes to old credit card debt, playing the waiting game may eventually pay off.
Credit Card Debt Statute of Limitations by state
Alabama 3 years
Alaska 3 years
Arizona 6 years
Arkansas 5 years
California 4 years
Colorado 6 years
Connecticut 6 years
Washington, D.C. 3 years
Delaware 3 years
Florida 5 years
Georgia 6 years
Hawaii 6 years
Idaho 5 years
Illinois 5 years
Indiana 6 years
Iowa 5 years
Kansas 3 years
Kentucky 5 or 15 years
Louisiana 3 years
Maine 6 years
Maryland 3 years
Massachusetts 6 years
Michigan 6 years
Minnesota 6 years
Mississippi 3 years
Missouri 5 years
Montana 8 years
Nebraska 4 years
Nevada 4 years
New Hampshire 3 years
New Jersey 6 years
New Mexico 4 years
New York 6 years
North Carolina 3 years
North Dakota 6 years
Ohio 6 years
Oklahoma 5 years
Oregon 6 years
Pennsylvania 4 years
Rhode Island 10 years
South Carolina 3 years
South Dakota 6 years
Tennessee 6 years
Texas 4 years
Utah 6 years
Vermont 6 years
Virginia 3 years
Washington 6 years
West Virginia 10 years
Wisconsin 6 years
Wyoming 8 years
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