Tally logo

Is There a Statute of Limitations on Credit Card Debt?

Generally speaking, the statute of limitations refers to the maximum amount of time that one party has to bring legal action against another for an issue, whether civil or criminal.

June 16, 2021

Have you ever gotten your credit card bill after an especially spendy month and wondered how you got yourself into this ordeal? Or maybe you’ve received a notice from a debt collector demanding payment for a final water bill that you forgot to pay four addresses ago?

When debt comes calling, whether it’s ages old or brand new, you have a few options: Put as much money as you can toward the debt to pay it down quickly, pay the minimum each month and pay it down not so quickly, or ignore it and try to wait out the statute of limitations (a really bad idea that isn’t recommended — read on to find out why).

Generally speaking, statute of limitations refers to the maximum amount of time that one party has to bring legal action against another for an issue, whether civil or criminal. For criminal federal tax evasion, the statute of limitations is six years. For medical malpractice, it’s two to six years, depending on the state. But is there a statute of limitations on debt?

How Does a Debt Collection Statute of Limitations Work?

The answer: It depends. Factors like the state in which the debt is held, the type of debt that’s in question, and your credit card’s terms and conditions are all considered. Timeframes can be a little as three years to as long as 15, and each situation is unique.

Debt can be assumed through four basic types of agreements: 

  • Verbal or oral agreements: Also referred to as unwritten debt, this is a spoken, handshake agreement between two parties. While oral agreements are considered legally binding, they can be hard to prove if they end up in court.
  • Written contracts: These are written agreements in which both parties agree to and write down the terms of the debt and repayment. They are also legally binding, but their setup can be informal. If you’ve ever called a doctor’s office to set up a payment plan on a medical bill, you’ve entered a written contract for debt.
  • Promissory notes: Mortgages, auto loans, student, personal loans and other types of debt, sometimes secured by collateral, and put on a set repayment schedule fall under this category. They are formal, written promises to pay, outlining the details of the loan and an amortization schedule
  • Open-ended debt agreements: This category includes credit cards, debt that can be borrowed, paid off and borrowed again. On a credit report, this is referred to as revolving debt.

Each state has its own statutes of limitations for each type of debt. Open-ended debt limits tend to range between three and six years, with the exception of Rhode Island and West Virginia, which allow creditors 10 years to legally pursue collection.

The federal government doesn’t typically get involved in personal debt, unless it’s to protect consumers from harassment by debt collectors. If you owe money to the feds, though, they will definitely get involved.

What Happens If the Statute of Limitations on Debt Expires?

If your debt exceeds the statute of limitations for its type in your state, it becomes what’s called “time-barred debt.” Here’s what that means, and what it doesn’t:

When your debt becomes time-barred, creditors can no longer sue you to get their money back. That doesn’t mean, however, that the debt — or the creditor — disappears. Collection agencies are still allowed to use other legal means to continue their pursuit of the debt even after the statute of limitations expires. These methods include phone calls and letters until the debtor writes to them demanding that they stop.

It’s also important to understand that some forms of debt don’t have a statute of limitations, including federal student loans, child support (in some states), some private loans and, in some cases, federal income tax owed. In these situations, creditors are sometimes allowed to pursue you indefinitely, including taking you to court. 

The timeline can be fluid

A set amount of time allowed for legal debt collection may seem straightforward at the outset, but it can get tricky when you really start to look at the timeline. And some creditors may try to work the numbers to their advantage in order to pursue the debt for a longer period of time. 

If you move from a state with a three-year statute of limitations on credit card debt to a statewith six, for example, a creditor may try to use your new address to their advantage. They may also argue over when the debt clock actually started ticking. Was it when the debt was first incurred, when the last payment was made, or some other date? The difference between the two can be years. 

The burden of proof is on the debtor

Also, if a creditor threatens to sue you over old debt that you feel is time-barred, it’s up to you to prove when the clock started. A judge may ask you to provide documentation that includes the history of the debt, the credit card’s terms and conditions or more. This proof can be difficult to find when the debt is years old. 

The clock can reset

To complicate matters even further, it’s also possible to restart the debt clock without realizing it. This is another good reason to understand your state’s laws about debt, including when it considers the clock on the statute of limitations starts ticking. 

If, for example, the state considers the start of the debt clock to be the last activity on the account, it means that making a payment, working out a settlement, or even acknowledging that the debt is yours could reset the timer. 

If it’s credit card debt, you may also have signed a fine-print agreement when you opened the account that renders certain state laws invalid. And while you’re sorting all this out, the interest keeps building.

How Does Old Debt Affect Your Credit Score?

If a debt collector is calling, it likely means your account has been sitting there untouched for at least three months, maybe longer. That time of nonpayment can have a negative impact on your credit report.

Credit scores can drop dramatically when a collection is added to your report. The longer the debt stays in collection, the higher the penalty. And unlike some states’ statutes of limitations, which can be as short as three years, a collection stays on your credit report for seven years. 

Better Options for Managing Your Debt

There are myriad reasons why allowing debt to go unchecked — or even worse, unpaid — can lead you down a long and frustrating road. The good news is that you have options for managing your debt even if it feels overwhelming.

Debt settlement agencies can help you negotiate payoffs with your various creditors so that you no longer owe the full amount. Companies specializing in debt consolidation settlement can negotiate on your behalf, although they will charge a fee.

Online apps can also help you get a handle on the big picture of your debt, and how to smartly pay it off. Tally’s credit card management app not only lets you see all your accounts from one central location, it also helps you stay on top of your debt to pay it off quickly and efficiently.

The app’s tools allow you to monitor all your important account details and deadlines, use Tally’s repayment methods to save you the most money on interest and make one easy payment each month regardless of how many accounts you have open.

The more quickly and efficiently you can pay back your creditors, the less you’ll need to worry about the pitfalls of falling behind.

Want to reach your debt-free goals faster? Learn more about how Tally may be able to help.