The Length of Time on a Credit Card to Collect Debt

Credit card debt is among the leading causes of excessive debt, with some people unable to pay their accounts because of divorce, job loss or illness. Eventually the credit card company closes the account and sells or assigns it to a debt collector. The collections process can last for a lifetime, as credit card debt does not expire. There are state statute of limitation laws that prevent court action on credit card debt, but debt collectors can use other methods to collect, including phone calls and written correspondence.

Statute of Limitations

State statute of limitation laws offer protection from lawsuits on old debts, including credit cards. The laws vary by the state, but on average debt collectors have about six years to win court judgments on defaulted credit card accounts. A judgment is a monetary award signed by a judge in a civil lawsuit. Debt lawsuits are popular with credit card companies because of their effectiveness. Debt collectors usually win in court because they can easily show the judge that the credit card account was not paid as agreed.

Considerations

Credit card debts beyond the statute of limitations are barred for collection through the courts. However, The New York Times reports that the burden of proof rests with the person sued. The Times reported in 2010 how one man was sued for a credit card debt that was not eligible for legal action. The judge granted a dismissal after receiving a handwritten note from the man informing her that the statute of limitations on the debt had expired.

Timeline

Card companies usually close accounts and list them as charged off after the account becomes 180 days past due. It is then placed with a debt collector, and can bounce around from one debt collector to another for years. Really old credit card debts beyond statute of limitation laws are often sold for pennies on the dollar. With such a small investment in the accounts the debt collectors realize impressive profits even if they collect only a portion of the balances.

Frivolous Lawsuits

Some debt collectors file lawsuits although they know the statute of limitations on the debt has expired. The Times reports that the debt collectors realize that some people will not respond to the lawsuit, leading to an automatic victory for the debt collector called a default judgment. It is possible for a debt collector to pay around $100 for an old credit card debt with a balance of $10,000. The debt collector may hope for a default judgment allowing collection of the entire balance through a payment plan or bank or wage garnishment.