The Statute of Limitations on Charged-Off Accounts

When an account remains past due for a certain amount of time, typically up to 180 days, the creditor may charge off the account. The creditor can try to collect the debt by filing a lawsuit against the debtor. The statute of limitations period on a charge off prevents a creditor from being able to lodge a lawsuit against a debtor for an indefinite period.

Charge Offs

When a creditor charges off a debt, it does not mean that the debt no longer exists. A charge off means that the original creditor has removed the account from its books by selling it to a third-party debt collection agency or by transferring it to an internal collections department.

Statute of Limitations

A statute of limitations imposes a time limit on how long a person has to file a lawsuit against someone else. The statute of limitations varies in each state but ranges from 3to 15 years for credit card debt. The statue of limitations begins to run from the date of the last activity on the account.

Restarting the Clock

In some states, the limitations period may restart in some circumstances. For example, making a payment or entering into a repayment agreement may restart the clock.

References

• MSN Money: Is There a Statute of Limitations on Debt?