The Statute of Limitations for Being Sued Over Credit Cards
Credit cards provide a convenient method for the average consumer to manage his needs by allowing him to accrue charges that he may then pay over time. Should a financial crisis or poor debt management skills cause an individual to leave his credit card bills unpaid, however, the clock begins ticking on the statute of limitations for legal redress.
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Facts
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When a credit card company cannot collect a payment from a customer, it has the option to either sue that individual or assign the unpaid balance and any additional fees and interest to a collection agency. Once the collection agency assumes responsibility for collecting the debt, it too reserves the right to sue. The statute of limitations places limits on when a collection agency or credit card company can file a lawsuit.
Function
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Statutes of limitations differ depending on the consumer's state of residence. The purpose of these laws is to protect individuals from lawsuits over old debts. When a company files a lawsuit against an individual, it must notify the debtor of the impending suit. The older a debt is, the more likely it is that the plaintiff will be unable to locate the debtor. Because many states allow plaintiffs in a lawsuit to merely mail notification of the impending hearing to the defendant's last known address, the statute of limitations protects consumers from losing a lawsuit because of a lack of notification preventing them from being able to appear in court and present a defense.
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Time Frame
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According MSN Money's Liz Pulliam Weston, most states' statutes of limitations for credit card debt don't exceed six years. Although different statutes apply to different types of debt, credit cards are often categorized as "open accounts" and thus subject to the shortest statute in each state. Not every state, however, categorizes credit cards in this manner. Consumers should check with their state attorney general's office to determine the specific statute of limitations for credit cards in their home state.
Misconceptions
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While a consumer cannot be legally sued over her credit card debt once the statute of limitations on the debt expires, she may have reset the statute without being aware of it. Making a payment on a delinquent debt will reset the statute of limitations since the time period is calculated by the date of an individual's most recent payment.
Warning
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Although the practice is illegal, some collection agencies "re-age" credit card debts in order to successfully file a lawsuit after the statute of limitations expires. The Federal Rules of Civil Procedure state that a debtor's failure to respond to the suit and arrive in court on the date of the hearing to defend himself constitute a forfeit--allowing the creditor to win a judgment against a debtor even when the debt in question is no longer legally valid.
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