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Statute of Limitations on Credit Card and other Debt

unpaid-debt-7years
(Legal Disclaimer: The information provided herein is for informational purposes only and is not intended as a substitute for professional advice.).

Your debt may be uncollectible. Your State’s Statute of Limitations governs the amount of time a creditor or collection agency can sue you for a debt. After the statute of limitations expires the original creditor or the collection agency cannot bring a lawsuit against you for the debt.

This does not mean a creditor or debt collector cannot attempt to collect the debt. It just means you cannot be taken to court or sued after the statute of limitations has expired.

Do not get the Statute of Limitations (SOL) confused with FCRA reporting rules and how long negative information will stay on your credit reports. Even though you cannot be sued for debt after the SOL has expired, the debt can still be on your credit report.

Some debt collectors will file a lawsuit anyway

There has been no shortage of rogue debt collectors trying to enforce debts that are barred by the statute of limitations. These time-barred debts are purchased from the original creditors for pennies on the dollar, making them a cash cow for debt collectors who choose to ignore the statute of limitations.

While the courts will allow a debt collector to file a lawsuit that is past the statute of limitations, you have a defense against the lawsuit. If the creditor has waited too long to sue you, you must raise the statute of limitations as a defense in the papers you file in response to the lawsuit. If you can prove that the debt is older than the statute of limitations, then you will not have to pay it and it will be dismissed. The number one action you must take is to respond to the lawsuit and assert your rights under the statute of limitations. If you do not respond…and the debt collector is hoping you don’t – then they can get a default judgment against you.

How to Calculate the Statute of Limitations

To calculate the statute of limitations start with the date you made your last payment (no other payments have been made on that account since then). For example:

  • You made a payment on an account in June 10, 2011 and no further payments have been made. July 2011 becomes your first date of delinquency (DOFD).
  • Let’s say you live in California where the statute of limitations is 4 years on “open-ended accounts.”
  • Now add 4 years to the July 10, 2011.
  • The statute of limitations runs July 10, 2015. The creditor or collection agency can no longer sue you for this debt.

What if you have moved to another State

If you incurred a debt in one state but moved to another state, the statute of limitations may not be the same for each state. In this case, the creditor or collection agency can choose to use the state with the longer statute.

Re-Starting the Statute of Limitations Date

The statute of limitations can be restarted, even if has expired, in some states simply by making a payment on the old debt, acknowledging you owe the debt or making a written promise to pay the debt. Your strongest weapon against a debt collector is an expired statute of limitations.

They are hoping you are not aware of this when they contact you about an expired debt. Do not get on the telephone with a collection agency, deal in written communication only. Always send the letter via certified mail, return receipt. Be sure to state in the letter “this is not an acknowledgment of the debt and the statute of limitations has expired!”

Credit Reporting Agencies and Negative Marks

According to the FCRA negative marks can remain in your credit files for 7 years, after which time the negative mark and any related collection account must be deleted. The length of time starts from the time you were late and no other payments were made plus 180 days after the missed payment. This becomes the FCRA Compliance Date. This date does not change, even if an account is sold or transferred to a collection agency. After 7.5 years, even if left unpaid, the negative account must be removed by the original creditor and whatever collection agency that may be currently reporting in your credit files.

Some collection agencies will fraudulently update their reporting status in order to keep the account active thereby extending the time the account appears on your report. If this occurs dispute it with the credit reporting agencies and they have to honor the original 7.5 year reporting date. Changing the FCRA Compliance Date is a serious violation, both the debt collector and the credit bureau could be sued.

State Statutes vs. Credit Reporting Agencies

Once the 7-year mark has been reached negative entries will drop off your credit report. This is not the same as your state’s statute of limitations on debt. Even though a debt may no longer legally appear on your credit reports after 7 years, you could still be sued for the debt if the statute of limitations in your state has not expired.

Be careful when Contacting Old Creditors

Some states have a provision that extends the statute of limitations if you make a payment on an old debt or acknowledge that you owe the debt. A good faith effort to pay or settle an old debt may turn into a huge negative mark on your credit report which could potentially be reported for another seven years. Always negotiate deletions when paying old debts and get everything in writing.

Finding your State’s Statute of Limitations on Debt?

Each State has it’s own Statute of Limitations on Debt. Certain debts do not have a Statute of Limitations such as Student Loans, Income Taxes and Child Support. Keep in mind State Statutes can and do change so it is imperative to look at your State’s Statutes to ensure the accuracy.

Statute of Limitations Listed by State

2 Comments

2 Comments

  1. Sharon

    November 2, 2010 at 3:38 pm

    If you originally acquired the credit card in one state but defaulted on the credit card payment in another state and are staying in the defaulted state location, can they use the statue of limitations on the original issue state address or only the state where the default occurred?

    Thanks!

    • Lisa

      November 2, 2010 at 9:18 pm

      The statute of limitations can be either where the debtor currently resides or where the contract (application) was signed. It is up to the creditor or debt collector which state they choose which means they will probably pick the state with the longer statute of limitations. Section 811 of the Fair Debt Collection Practices Act – “Legal actions by debt collectors” allows the debt collector to make the choice.

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