Credit Card FAQ
Is There A Time Limitation On Collecting Credit Card Debt?
There is a lot of bad information available about credit card companies and one of the most frequently asked questions is, "Is there a time limitation on collecting credit card debt?" The question implies that if you don't pay as agreed, a creditor only has a certain amount of time to try to get you to do so.
Knowing the laws in your state about the time limitation on collecting credit card debt is important. Many states only allow a company up to 6 years before they can file a suit. However, some states allow more than 7 years. Don't be fooled, this does not mean if you don't pay your debt off within 6 years, they cannot collect it from you.
What Is A Time Barred Debt?
The time limitation on collecting credit card debt only means that's how long they have to file suit against you. If they have not filed a suit against you before the cutoff, the debt is considered a time barred debt. This means the debt has reached the cutoff date and the creditors can no longer use the court system to collect from you. However, it does NOT mean they can no longer try to collect from you. They can still contact you to try to get their money.
What Starts The Clock?
At this point you may be hoping the time limitation began when you signed your paperwork. But, according to the law, the time limitation on collecting credit card debt actually begins after the last activity on the account. So, if you've had a credit card for 4 years and then stop paying it, the clock begins after that last payment you made. It's also important to note, if your state's time limitation is 3 years, and you make a payment after 2 years of inactivity, the clock starts all over again at the date of that last payment.
Consequently, making a deal with the creditor for lower payments, or removal of late fees will also serve to reset the time limit. If you were to stop paying again, the time limit would start over. But, ultimately, if you can get a deal that you're happy with and comfortable paying, it's best for the sake of your credit and your peace of mind to take care of it. After all, it is money you agreed to pay.
What If I Move?
Because the time limitation on collecting credit card debt varies by state, some people who live in a state with longer limitations think that by moving out of state they'll be spared. If only it were that easy. However, moving to a state with a shorter limitation won't help you. The law is written that the creditors are subject to the limitations of "where the consumer signed the contract." Sadly, you can't run away from your bills.
Why Is A Time Barred Debt Still Showing On My Credit Card?
As previously stated, a creditor can still try to collect on a debt after that debt is time barred. They just can no longer try to sue you for it. The debt can stay on your credit report for up to 10 years after the most recent activity. This actually means old debts can hang around on your credit report indefinitely. If you reset the clock by contacting the creditor or making a payment, they can report for another 10 years. If they sell the debt to a collection agency the 10 year clock starts over again. This is different than the clock on the time limitation on collecting credit card debt, but still affects you by hurting your credit score.
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