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The Basics Blog 4.9.11

What Is Your State’s Statute of Limitations on Credit Card Debt?

If you have outstanding credit card debt you should know your state’s statute of limitations on how long a creditor has to take you to court to collect the debt. If it is three years, then after three years, you are safe from a credit card lawsuit.

The time period begins counting from the first missed payment.  But, if you make a payment at a later date, the clock resets. If you move your residence to another state, that increases the time. Sometimes states have a shorter time period for revolving or open accounts, as compared to a debt governed by a signed contract.  For example a state’s statute of limitations on debt could be three years for revolving credit card debt and six years for car loans.  Typically state statutes of limitations for credit card debt run three to six years. Here is a link to each state’s consumer statute of limitations on debt.

The reality, though, is you may not be safe when your state’s statute of limitations is up on a credit card debt.  Junk debt investment companies buy old debt from credit card companies for 10 cents on the dollar and from other junk debt buyers for even less. These junk debt buyers have been know to take a consumer to court beyond a state’s debt collection statute of limitations, banking on the consumer being ignorant of their rights and on the consumer feeling guilty about owing the debt. 

In March of 2011 the Associated Press reported a story about a Montana man who sued a debt collection law firm, who represented a junk debt buyer, for bringing suit after Montana’s statute of limitations was up on his credit card debt.  The man was awarded $311,000.  The junk debt buyer had incorrectly given information to the law firm that the man had made a payment that allegedly reset the statute of limitations.  The junk debt buyer admitted their error and wrongdoing.

One last important point about statutes of limitations—A credit card contract usually stipulates a state whose laws will govern that contract.  This contract stipulation applies to statutes of limitations as well. For example several credit card companies are headquartered in Delaware, which has a three statute of limitations for credit card contracts. If you have a credit card with one of those companies and you live in a state that has a six year statute of limitations, then you have the right to say three years applies to your case, if you are sued for credit card debt.  There are court precedents that back this up.

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