Sunday, November 9, 2008

Illinois Statute of Limitations on Credit Card Accounts

Creditors or debt collectors who sue debtors for credit card debts must file their lawsuit before the statute of limitations expires. If the lawsuit is filed past the deadline, the debtor can legally defend the lawsuit and win the case. Illinois law gives creditors and debt collectors five years to sue for credit card debt.

Five-Year Statute

    Illinois law specifies a different statute of limitations for debts based on written contract and contracts not in writing. For written contracts, the statute of limitations is 10 years. For contracts not in writing, sometimes referred to as express, implied or oral contracts, the limitations period is five years. Although creditors and debt collectors have tried to argue that the 10-year statute applies to credit card debts, the Illinois state courts have rejected this argument. For all debts based on credit card charges, the five-year statute applies.

Asserting the Statute as a Defense

    An important concept to understand regarding the statute of limitations is that it is a legal defense to a lawsuit, and it must be asserted in court to be effective. No matter how much time has elapsed since the credit card debt was incurred, it does not automatically expire due to the passage of time. If the debtor is sued on credit card debt for which the statute of limitations has expired, the debtor is responsible for answering the lawsuit and asserting the defense. Failure to do so is treated by the court as a waiver of the defense and a default judgment can be entered on the debt.

Reviving the Statute

    The statute of limitations for credit card debt can be affected by the debtor's conduct. If no activity --- charges or payments --- have occurred for more than five years, and the debtor makes a partial payment on the account, the statute of limitations will restart from the date the partial payment is made. The same result can also occur if the debtor signs a document acknowledging the validity of the debt or a promise by the creditor to extend a due date.

Collection Activity on Expired Debt

    Creditors and debt collectors can continue certain collection activity after the statute of limitations has expired on a credit card debt, such as providing information about the debt to a credit reporting agency and engaging in reasonable phone and mail contact with the debtor. However, federal law prohibits unfair debt collection practices or the making of false or misleading statements to a debtor. If a creditor or debt collector knowingly files a lawsuit on an expired debt, this may be grounds for suing the creditor or debt collector for an unfair practice. In situations where the debtor has a good statute of limitations defense to a credit card debt, he should seek the legal advice whenever he has been sued on the debt.

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