A line of credit works similar to a credit card, according to the credit reporting agency Experian. Lines of credit can be used to purchase goods or withdraw cash up to a pre-set credit limit.
Credit Reporting
If you pay your line of credit account on time and eventually close it, your positive payment history will be reflected on your credit reports for 10 years from the date of account closure, according to Experian. But if you fail to pay the bills on time, the federal statute of limitations on resulting negative credit reporting lasts for seven years from the date of the missed payment.
Potential Consequences
A line of credit lender can indeed sue you if you don't pay the bills as promised, warns the book "How to File for Chapter 7 Bankruptcy." But under your state's statute of limitations, a lender can only legally sue you for a finite amount of time, notes Fair Debt Collection.
Lawsuit Time Frames
If you live in Kansas and don't pay your line of credit on time, the lender can only legally sue you for five years, according to Fair Debt Collection. But if you live in Montana, then state law 27-2-202 allows the creditor eight years to sue you.
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