State statutes of limitation for credit card debt

Collectors have a limited time to file lawsuits over unpaid card debts

By Emily Starbuck Gerson and Connie Prater

CreditCards.com compiled a state-by-state listing of credit card debt statutes of limitations. Click on a state; more information will appear below the map. See notes and explanations.

Notes: The chart shows the time limit on written contracts or open-ended, revolving credit accounts such as credit card agreements. Many state laws and codes do not specifically refer to "credit cards" or "credit card agreements." Instead, the statutes may use the general terms "written contracts" or "open accounts."   State laws are subject to change. Court decisions regarding limitations on the right to file suit may alter state laws, those rulings may then be overturned. The chart is current as of June 30, 2008. Write to Editors@CreditCards.com to report updates or corrections.  

What a statute of limitations is, how it works
Creditors and debt collectors have a limited time window in which to sue debtors for nonpayment of credit card bills. That limit is set by a state's statute of limitations. Anyone with a credit card should know their state's statute.  

"In most states, the statute of limitations period on debts is between three and 10 years; in some states, the period is longer," according to the U.S. Federal Trade Commisison (FTC). Debts that have lasted longer than the statutes allow are often referred to as "time-barred debts."

Time-barred debt
Debt collectors may try to collect time-barred debts, but they cannot use the courts to collect them.

"If a debt collector sues you to collect a time-barred debt, you can have the suit dismissed by letting the court or judge know the debt is, indeed, time-barred," according to the FTC.

Debt collectors and consumer advocates, however, caution that the statute of limitations (SOL) does not prevent debt collectors from attempting to collect on debts. They just cannot successfully sue to collect the debts.

"A debt collector may not threaten to sue on a time barred account," says Rozanne Andersen, general counsel of ACA International, the largest debt collection industry trade group. "The request to pay a debt after the SOL has expired is legal."

Mary Spector, an associate law professor at the SMU Dedman School of Law in Dallas, says many consumers ignore court notices about old debts and end up losing cases that might otherwise be thrown out of court because the statute of limitations has run out.

"In Texas, it's usually up to the defendant to show that the debt is time barred under the statute of limitations," Spector says. Her advice: don't ignore the court papers and get a consumer lawyer to represent you.

Court rulings may take precedence
Some states may have laws or codes governing the time limits for filing civil suit regarding contracts. However, state court rulings may take precedence and make the effective statute of limitations for consumer contracts or debts earlier or later than state law.

That was the case in Georgia in January 2008, when a Georgia Court of Appeals ruled (in Hill versus American Express) that the statute of limitations on an unpaid credit card debt was six years. The Georgia code sets the limit on open-ended accounts at four years. This means that if a creditor files a lawsuit against a debtor in that state, the six-year SOL would likely prevail in that court case.  

Federal law
The Fair Debt Collection Practices Act, the federal law that governs how and when debt collectors can contact consumers and collect on unpaid bills, dictates where legal action on debts can be filed. According to Section 811 of the law, debt collectors may file suit only in the jurisdiction where the "consumer signed the contract" or where the consumer lives.

Some credit card agreements may stipulate that the laws governing the home state of the issuer determine the terms and major provisions of the contract. That means that if the credit cardholder lives in Maine, but the issuer is based in Delaware, the Delaware statute of limitations may apply.  

Do not confuse the statute of limitations with the length of time that a debt may remain on a credit report. A bankruptcy, for instance, will remain on a credit report for 10 years regardless of the statute of limitations. If a creditor successfully wins a judgment for payment of a debt, that information can remain on a credit report for seven years.

When does the clock start to tick? It may vary by state, but generally the statute of limitations begins when a credit card account becomes delinquent -- the date of the last payment. However, in some states the clock begins to tick six months after the last payment. To determine the deadline to file suit on the debt, add the number of years of the statute of limitations to the start time.  

Re-aging debt
Consumers should be aware of a practice called re-aging of old debts. The clock on the statute of limitations may start anew if a consumer makes a payment -- even a small amount -- on a debt that has exceeded or is approaching the end of the statute of limitations. Acknowledging an old debt may also extend the time limit on potential debt collection lawsuits. Consumer advocates now advise debtors not to acknowledge old debts or debts they don't recognize as their own to avoid inadvertently re-setting the clock on the statute of limitations.

"Any new activity on it could re-age it  and make it more collectable," says Lauren Saunders, managing attorney for the National Consumer Law Center, a consumer rights group. "You're better off ignoring a call about an ancient debt. It's best to send them a lettersaying I don't recognize this or please verify it."

To comment on this article, write to: Editors@CreditCards.com.

See related: FTC urges changes to Fair Debt Collection Practices Act, Struggling debt collectors to debtors: Let's make a deal, Know your rights: Fair Debt Collection Practices Act, Debt collection sample letters, 11 tips for dealing with debt collection, collectors, State by state bankruptcy map, Bankruptcies creeping up as economy sours 

Updated: January 22, 2009

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