Even if the statute of limitations has run out on credit card debt you owe -- that you're no longer obligated to pay it -- it's unwise to ignore a collection agency trying to collect it. The collection agency can keep trying to collect the debt until you take legal steps to stop them. If you fail to respond to a suit because the statute term has expired, you can end up losing the suit by default.
Tick, Tick, Tick
Nineteen states have specific statutes of limitations for credit card debt. Other apply either their own time limit for an oral contract or written contract. The number of years a credit card company has a legal right to collect varies from as little as three years in Alabama to 15 years in Kentucky and Ohio. Note that a credit card company may claim the applicable statute term in the state where it's incorporated, not the state where you used the card or where you reside.
Once the statute of limitations on your debt runs out, the debt remains. However, if you present evidence to the court that the statute has expired, it may not require you to pay. Keep in mind that these statutes are independent of the seven-year limit on negative information in your credit report. After a bad debt has been on your credit card for seven years, you have a legal right to have the information removed from the report. However, that doesn't change the status of your debt either.
Resetting the Clock
Just because the statute has run out doesn't mean a collector won't try to get you to pay the debt. Unless you exercise specific rights, such as sending a cease and desist letter to the collection agency, they may continue to contact you. The Consumer Financial Protection Bureau provides an online form you can base your letter on. However, if you believe the statute has run its course it may be best not discuss a credit card debt with a collection agency at all. A CreditCards.com article notes that merely reaffirming the debt can reset the clock on the statute of limitations. A collection agent may ask you to make some very small payment to show good faith or so they won't have to call you again, but any payment, not matter how small, can reset the clock.
Respond to Claims
Even after the statute of limitations has run out, a collection agency may sue you. Doing so costs them little because they typically bundle many suits into a single action. If the defendants don't show up, the court may render a default judgment against them regardless of an expired statute. You may be able to get the decision reversed on appeal but it's time-consuming, expensive and uncertain. If a collection agency files suit for an expired debt, consult an attorney.
- Nolo Press: Time-Barred Debts: When Collectors Cannot Sue You for Unpaid Debts
- CreditCards.com: Expiration Dates Fuzzy on Old Card Debt
- Consumer Financial Protection Bureau: I’ve Been Contacted by a Debt Collector and Need Help Responding. How Do I Reply?
- CreditCards.com: Don't Restart the Clock on Expired Debts
I am a retired Registered Investment Advisor with 12 years experience as head of an investment management firm. I also have a Ph.D. in English and have written more than 4,000 articles for regional and national publications.