Is there a time limitation on collecting credit card debt?

A person who hasn’t paid a credit card debt won’t be subject to collection proceedings forever. There is a statute of limitations in place barring creditors from going after consumers for non-payment of debt. Once the time limit has expired, the consumer shouldn’t be contacted by collection agencies; but, in some situations, the unpaid debt may still present a problem.

Statute of Limitations on Credit Card Debt

Each state sets its own limitations for collecting credit card debt. Depending on where the consumer lives, the time may be as little as three years or as long as seven years or more. The statute of limitation refers to written contracts or open accounts. Credit card debt is considered an open account in many parts of the United States.

The statute of limitations governs the length of time a creditor can sue to recover an unpaid debt. Once the time has passed, the creditor may not go to court, but they can still contact the consumer to attempt to recover the debt. The company can get in touch by phone or mail after the time has run out.

Calculating the Limitation Date

The date on which the creditor may no longer sue is based on the last activity on the account. Last activity means the last date the card was used or the last date a payment was made. A consumer may inadvertently start the clock running on the debt by making a payment after the account has been inactive for some time.

In some cases, making a payment arrangement with a collections company may be considered activity on the account. If a consumer is contacted by someone attempting to recover the debt, the best approach may be to say nothing and hang up the phone.

If a consumer receives a notice that they are being sued over a debt that they believe is past the statute of limitations in their state, they still need to respond to it. Ignoring the summons means the debt collector may be able to get a judgment signed against the consumer for the amount alleged to be owed. Then the creditor can take steps to enforce the judgment, such as garnishing the consumer’s wages until the debt is paid in full.

A better choice is to appear in court on the date indicated with records that show the date of the last activity on the account. If the consumer can demonstrate to the judge that the statute of limitations has run out, the matter will be dismissed.

Some creditors will sell an old debt to a collections agency, which will attempt to collect on it even if the statute of limitations has run out. People who move to a different part of the country with a longer time for creditors to collect unpaid debt may find that the creditor will attempt to use this fact to their advantage and claim that the law where the consumer currently resides now applies. Consumers should take steps to educate themselves about their rights and responsibilities under the law that applies in their state.

Old Debts and Credit Rating

Simply because the statute of limitations has run out on an old credit card debt, it doesn’t mean there will be no consequences for the account holder. The delinquent account may still appear on the consumer’s credit report for seven years. A history of not paying bills on time may make it more difficult for a consumer to get credit in the future, even when the event occurred some time ago.

Past behavior is used by lenders and credit card companies as a way of determining the level of risk that a person applying for credit presents. A person who is perceived to be a relatively low risk will benefit from being able to qualify for loans and mortgages easier, as well as being able to get a better interest rate from a credit card company.

Even people who have some blemishes in their credit history may still qualify for a card. They may need to look to a secured credit card to re-establish their credit at first. Once they have developed a history of paying their bills on time for several months, the credit card account holder may be able to qualify for a non-secured card.

The time limitation on collecting credit card debt varies, depending on the place where a consumer lives. To find the right credit card for your needs, no matter where you call home, check out the free credit card Chaser tool. Click on it on our home page and start comparing your credit card options today!

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