Time is one of the most important factors related to credit card debt. Your level of delinquency, the state of your credit report, whether you can be successfully sued for what you owe: each of these things depends on time. This, in and of itself, is not confusing; however, the nuances and state-by-state variations characterizing the relationship between debt and time are. Nevertheless, it’s important that you understand them in order to avoid a lawsuit, minimize credit score damage, and stick up for your consumer rights. And while things certainly change throughout the process, as you’ll see below, it all starts with the statute of limitations.
The Statute of Limitations
Various timeframes are important to debt, but one of the most significant is its Statute of Limitations (SOL). This is essentially the time during which a lawsuit is legally relevant. Before the statute of limitations expires, you can be successfully sued for amounts owed. Once it runs out, a suit can be initiated, but it will be thrown out of court if you make it clear that the debt is “time barred,” or older than the statute of limitations.
The age of debt depends on how recently you made a payment towards it. The statute of limitations clock begins at the time of last payment and resets each time you make a payment, thereby re-aging your debt.
It is important to note that the statute of limitations has nothing to do with how long negative information remains on your credit report and that making a payment in no way affects this amount of time. In addition, if a lawsuit is brought against you and the lender wins (i.e. a judgment is rendered against you), the statute of limitations is no longer relevant, as the lender is essentially granted unlimited time in which to collect amounts owed.
You can find your state’s statute of limitations for debt in the table below. Keep in mind, however, that there are caveats to the time frames laid out in the table below. For example, if you move states after opening your credit card, you could be sued in either the state you originally lived in or the state you moved to, as jurisdictional issues related to SOL aren’t always clear.
|State||Statute of Limitations||State||Statute of Limitations|
|Alabama||6 Years||Montana||8 Years|
|Alaska||3 Years||Nebraska||5 Years|
|Arizona||6 Years||Nevada||6 Years|
|Arkansas||5 Years||New Hampshire||3 Years|
|California||4 Years||New Jersey||6 Years|
|Colorado||6 Years||New Mexico||6 Years|
|Connecticut||6 Years||New York||6 Years|
|Delaware||6 Years||North Carolina||3 Years|
|District of Columbia||3 Years||North Dakota||6 Years|
|Florida||5 Years||Ohio||15 Years|
|Georgia||6 Years||Oklahoma||5 Years|
|Hawaii||6 Years||Oregon||6 Years|
|Idaho||5 Years||Pennsylvania||4 Years|
|Illinois||10 Years||Rhode Island||10 Years|
|Indiana||6 Years||South Carolina||3 Years|
|Iowa||10 Years||South Dakota||6 Years|
|Kansas||5 Years||Tennessee||6 Years|
|Kentucky||15 Years||Texas||4 Years|
|Louisiana||10 Years||Utah||6 Years|
|Maine||6 Years||Vermont||6 Years|
|Maryland||3 Years||Virginia||5 Years|
|Massachusetts||6 Years||Washington||6 Years|
|Michigan||6 Years||West Virginia||10 Years|
|Minnesota||6 Years||Wisconsin||6 Years|
|Mississippi||3 Years||Wyoming||10 Years|
(The Statutes of Limitations shown in this chart are for written contracts like credit card agreements. Oral contracts have shorter periods in many states.)
Having your state’s statute of limitations run out does not mean that your creditor no longer has the right to try to collect money owed. However, it does mean that the courts will not be a viable method of doing so, provided that you explicitly notify the judge that your debt is time-barred. Failing to bring this information to the court’s attention could result in the progression of a lawsuit that could have easily been dismissed.
Consider the disclaimer that creditors in New York City are required to include in collection efforts:
“The legal time limit (statute of limitations) for suing you to collect this debt has expired. However, if somebody sues you anyway to try and make you pay this debt, court rules REQUIRE YOU to tell the court that the statute of limitations has expired to prevent the creditor from obtaining judgment.”
Making a payment is not always the only act that can re-age debt (i.e. make the statute of limitations reset) either. According to the New Mexico Attorney General’s handbook, this occurs if you:
- “make any payment of the debt”
- “sign a paper in which you admit that you owe the debt or in which you make a new promise to pay”
- “sign a paper in which you give up (“waive”) your right to stop the debt collector from suing you”
Determining Your SOL
If you believe that the statute of limitations on your debt has expired and you are still hearing from debt collectors, the first thing you should do is ask whether what you owe is time-barred or not. It’s illegal for debt collectors to lie when answering this question. They can, however, simply decline to respond, in which case you should inquire as to the date of your last payment. If you get a response, you’ll be able to determine whether the statute of limitations has run out or not. If you don’t get a response, you can send a letter to the debt collector disputing what you owe and asking for verification that you do indeed owe it. Debt collectors are legally required to suspend collection efforts until verification is provided.
Ultimately, this should give you an idea of where you stand, at least as far as a lawsuit is concerned. If your debt is time-barred, debt collectors don’t really have any power over you, and you can send cease-and-desist letters to get them off your back. If it’s still legally relevant, all that’s left to do is either wait and hope not to get sued before the SOL expires or seek to reach a settlement with your creditor. The latter should be your preferred option, but be very careful what you say because the last thing you want to do is inadvertently reset the statute of limitations. So unless you plan to pay off your debt in full or have reached a settlement that will contractually eliminate the threat of a lawsuit, don’t start making small payments in hopes of stopping the calls, as you’ll neither become debt free nor stop debt collectors from bothering you.
Judgment Against You
When a creditor wins a lawsuit (i.e. a judgment is made against you), the statute of limitations is no longer in play given that it merely dictates when you can use the age of your debt as a viable defense against a lawsuit, and that ship has clearly sailed already. With that being said, a judgment will be listed on your major credit reports and will remain for seven years from the date it’s filed, no matter what you do, which will damage your credit standing significantly. The decision will also open up a number of different means of collection for the creditor (or whoever has purchased your debt). Depending on the state, the collecting party may be able to garnish funds from your bank account and/or your monthly salary, force you to sell property, or even put you in jail. As if that weren’t enough, the amount you owe may accrue interest until it is paid off in full, and debt collectors generally have 10-20 years to collect on judgments, depending on the state – a timeframe that can typically be renewed
Given that many consumers become indebted due to job loss or other financial hardships, there’s no guarantee that the aforementioned collection techniques will work. That’s why credit card companies will often accept settlements, and if you can afford to pay a significant amount of what you owe in one lump sum, it might be a good idea.
As mentioned earlier, making a payment has no effect on the length of time information about your debt will remain on your credit report. This clock begins 180 days after you first become delinquent and nothing you do thereafter affects it. Debt is only removed from your credit report when the requisite amount of time (usually 7 years) has passed, but you could change the status of your debt to “paid” or “settled” by making payment. This is marginally better for your credit score than having your debt classified as “not paid.”
Ultimately, the decisions of whether or not to pay outstanding credit card debt and when to do so are yours alone to make. However, as is the case with any major decision, it’s imperative that you have all of the facts and know your options. Be sure to understand the statute of limitations, and do not let a creditor bully you into doing or saying anything that will extend the time during which you are liable. Finally, if a creditor files a lawsuit when your debt is time-barred, remember that you must take action to have the courts throw it out. If you don’t prove that the debt is too old, the creditor will likely win his case.
This can all get a bit confusing at times, especially when you have debt collectors breathing down your neck. To help, we compiled the following table, which provides quick tips and information for you to reference at different times during the process of handling credit card debt.
Judgment Against You
|Within Statute of Limitations Timeframe?||Yes||