The Statute Of Limitations On Credit Card Debt

Most people are aware of the fact that there are statutory limitations on criminal offenses and that individuals may only be charged and dealt with by the courts for offences within a specified time limit for an offence.

It is also common knowledge that, if an individual is not dealt with within this time limit, then he has escaped the law and cannot be pursued further (at least not within the criminal system). You may however be surprised to learn that the same system applies to your debts.

Before looking at the details of these limitations and at the statute of limitations on credit card debts in particular though, let us just take a moment to think about the lengths to which a creditor is likely to go to get his money back.

If you default on a loan then your creditor is faced with an often long, complex and costly battle to get his money back and will have to decide whether or not it is worth the effort of taking you to court in order. He also needs to consider carefully whether, even if he is granted judgment against you, you actually have sufficient assets to pay off your debt.

In the vast majority of cases, unless the sum of money concerned is substantial, the creditor will cut his losses and accept this is a simple expense of doing business. He will however not normally simply write the debt off but recover at least a small part of his money by selling your debt on to a debt collection agency.

The debt collection agent is however in a similar position to the original creditor, except for the fact that he has bought your debt for mere pennies on the dollar and so stands to make a reasonable profit if he can recover at least some of the debt. Nevertheless, the debt collection agent is again a businessman who must balance his costs in recovering the debt against the money he is going to recover. Consequently, there will also come a point at which he will say that it is simply not worth the effort and write the debt off.

In other words, if you simply outwait both your original creditor and the debt collector, then you can get away without having to repay your debt.

Now, at this point, it must be stressed that the creditor does have the right to take you to court and to ask the court for an order to seize your assets in order to recover the debt and, from time to time, creditors do indeed do just that. Whether or not they would do so in your particular case depends very much upon the particular creditor and whether or not he believes that such action would result in the recovery, at least in part, of the monies owed.

It should also be stressed that we are not suggesting here that the solution to your debt problems should be to simply outwait your lenders. Indeed, we would suggest that you should in the first instance negotiate repayment with your credit card company and, if the debt has already been sold on, negotiate a settlement with the debt collection agency. To this end we have included two articles on these subjects entitled "Negotiating Settlement On Credit Card Debts" and "How To Deal With Debt Collection Letters" respectively.

Now, whether or not you outwait your original creditor or the debt collection agent, both will have to recover their money within a stipulated period of time or, whether they wish to pursue the debt or not, the Statute of Limitations will come into play and they will lose their right under the law to recover their money.

The time limit placed on the recovery of debt depends up the nature of the original agreement and where you live, since each state has its own set of statutes.

As far as we are concerned here it is the fourth of these which applies as this refers to revolving lines of credit with variable balances and includes credit cards.

For this class of agreement there is a set limitation period for each individual state and this varies quite widely so you will need to check it for your own state. As an example however the majority of states impose a limit of 3 years on the recovery of credit card debt while the maximum period imposed by just one state is currently 8 years.

Dealing with creditors can be difficult and finding the best solution to your particular problem may not be easy. Nonetheless, when putting together a plan you should be aware of the Statute of Limitations for your state and, where appropriate, figure this into your calculations.

Recommended books from

The Total Money Makeover: A Proven Plan for Financial Fitness
by Dave Ramsey
Amazon Price:
Customer Review: The price & shipping were great, this book is great for people ready to make a change & get rid of debt forever.

The Rich Switch - The Simple 3-Step System to Turn on Instant Wealth Using th...
by David Hooper
Amazon Price:
Customer Review: There is a reason why some people are successful and some are not. Many chalk it up to luck, intelligence, hard work, and these all play a factor in our success. Although the one single factor all successful people have in common is their mind set. Many have bad luck, some are not so smart, and some successful people are even on the lazy side.

BestCredit: How to Win the Credit Game, 2nd Edition
by Dana Neal
Amazon Price: $19.80
Customer Review: I work for a credit union, and part of my job is to create financial education materials for our members. Lately I've been researching the hottest current topic: credit repair. I've read so many book on the subject, and spent hours and hours on the Web, and the #1 thing I've learned is that the info that's available is mostly NOT accurate, NOT c...

Credit 911: Secrets and Strategies to Saving Your Financial Life
by Rodney Anderson
Amazon Price: $16.47
Customer Review: Enjoyed the book and the real life stories on how managing your credit effects all area's of your life.

Digging Out of Student Debt - NASDAQ
1 Sep 2010 at 8:18am

Digging Out of Student Debt
NASDAQ
Defaults are subject to your state's statute of limitations, typically six years. If you do get sued and lose, the creditor can garnish your wages, ...

and more »

New York's 2010 budget increases tax rates, reduces deductions and defers cre...
2 Sep 2010 at 4:50am

New York's 2010 budget increases tax rates, reduces deductions and defers credits
Lexology (registration)
Repeal of Bad Debt Provisions for Private Label Credit Card Lenders. Under prior law, private label credit card lenders and vendors who use the...

Credit Card FAQ: Erica Sandberg: What sort of credit card debt help is best ....
25 Aug 2010 at 8:01am

Credit Card FAQ: Erica Sandberg: What sort of credit card debt help is best ...
CreditCards.com
... pennies on the dollar, especially if the statute of limitations for lawsuits has passed or if evidence of it is about to fall off your credit report....

How to Handle Aggressive Debt Collectors - Go Banking Rates
23 Aug 2010 at 4:36pm

Go Banking Rates
How to Handle Aggressive Debt Collectors
Go Banking Rates
For instance, your state may allow a company to collect on a credit card debt for five years, while another could go for seven. Once you determine how long ...

and more »