Statute of Limitation on Credit Cards

Creditors cannot collect credit card debt after the time to do so under the statute of limitations has expired. The U.S. Federal Trade Commission also refers to this type of debt limitation as time-barred debt. The downside for debtors is that the statute of limitations on credit card debt is not a silver bullet and comes with several caveats and potential negative consequences such as poor credit.

Time Frame

Time and debt collection are regulated by state statutes of limitations.

The statute of limitations on credit card debt varies by state. For example, in Virginia, the time credit card debt is legally recognized under the statute of limitations is only three years, but in Rhode Island it is 10 years. Three factors can influence which states' statute of limitations applies; specifically, the domicile of the debtor, the location of the creditor and the terms of agreement signed by the debtor.

Legislation

Since both federal and state laws have statutes of limitations, many cases are non-exclusive to courts within each jurisdiction. For example, a debt collector can be sued in state or federal court, according to Expert Law. Additionally, the Fair Debt Collection Practices Act states that a credit card debt collector may not collect debt via lawsuit once the applicable statute of limitations takes affect. This same law also circumscribes how a creditor may seek out indemnification for credit card debt owed.

Consequences

The U.S. Federal Trade Commission points out non-payment of credit card debt stays on credit reports for seven years or longer. This is the case even if the statute of limitations no longer requires the debt to be paid. A record of unpaid debt also affects credit scores that lenders use to determine loan eligibility and interest rates. Despite statutes of limitations' restrictions, a debt can continue to exist and may incur continued debt-collection activities.

Exceptions

Credit card payments reset statutory limitations.

Creditors can legally continue to collect debt if certain conditions nullify or reset a state statute of limitations on debt. For example, if after six years and 11 months a payment is made on an unpaid credit card debt, the time established by the statute of limitations begins again. Another exception to statutes of limitations is the filing of bankruptcy. Bankruptcy court decisions can either absolve or restructure debt, even if the statute of limitations has not led to credit card debt being time-barred.

Tips

Financial records support court claims.

The New York City Department of Consumer Affairs and other consumer protection agencies recommend keeping organized credit records and correspondence. Doing so verifies both the validity of collection efforts and applicability of the statute of limitations. Reading and assessing a credit card agreement and then signing it on paper, rather than via electronic contract, can influence which state statute of limitations applies to the credit card debt.