A general rule in the collections industry holds that the longer a defaulted account ages, the less likely it will be collected. The principal risk to creditors engaged in collecting old credit card debt is that attempts to legally enforce payment may run afoul of the statute of limitations.
Statute Of Limitations
The statute of limitations is a legal principle that precludes a creditor from filing suit against a debtor after a specified period of time has elapsed from the date the cause of action accrued, which, in most cases, is the date on which the credit card went into default. Any suit filed by a creditor that is outside the specified period is said to be "time-barred" and must be dismissed by the court.
Operation of the Statute
Each state establishes its own statute of limitations period for the collection of credit card debt. Furthermore, the statute of limitations period for recovery of credit card debt may vary from state to state.
Significance
A debtor who successfully raises the affirmative defense of the statute of limitations against a credit card company for failure to comply with the designated statute of limitations period may request that the court dismiss the complaint filed against him. Once a creditor's complaint is dismissed, the creditor has no further legal recourse against the debtor.
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