While defaulting on a credit card can destroy your credit rating, you still have some protection against creditors. Your creditors only have a limited period of time in which they are able to sue you for not paying your credit card debt. That period of time is determined by each state’s statute of limitations.
According to the FTC, all states have a statute of limitations period on debts that is between three and 10 years. Behind every statute of limitations, there is a legal agreement that binds the consumer and the loan provider. The most common agreement associated with credit cards is an open-ended account, and although the length of the statute of limitations varies in every state, the clock starts at one of two instances: either when you fail to make a payment, or when the credit card company requests for the amount owed paid in full.
Once the time period for suing has expired, your debt is then referred to as “time-barred.” Such cases are typically dismissed within court, which is why it is important to know the state-specific laws. Once the statute of limitations has expired, a creditor can no longer sue you for the money owed, but they are still within their rights to collect the debt. If a collector calls you to collect on a debt that you believe is past the statute of limitations, you do not have to pay it. If you do make a payment on the debt, it can reset the clock on the statute of limitations and allow the creditor to sue you.
Most of the states have a clear-cut indication of their statute of limitations, but others are more difficult to identify. A given state code may have a set limit, but if there is a court case that has set a precedent different than the statute, it is likely that any decision will defer to that court ruling.
It isn’t surprising that credit card companies try to capitalize on old debt, but if their time has run out, you can use your knowledge of the statute of limitations to prevent them from suing you. The statute of limitations is in place to protect you as a consumer, so awareness of your state’s statutes can prevent collectors from benefiting from an already frustrating situation.
At Ovation, we like to help people stay on track with credit debt so that you never have to worry about the statute of limitations. With the right tools and knowledge you can escape debt altogether.