Statute Of Limitations On Credit Card Debt Collection

May 13th, 2009

There’s an increasing trend in the debt collection industry, that involves debt collectors buying really old debt accounts for pennies on the dollar and then use aggressive techniques to get the consumers to pay the debt. The reason why this trend has become so prevalent lately is that it can be a very lucrative thing for those debt collectors. They buy old, out-of-statute debts at prices as low as 25 cents for every $100 in face value. You can now understand that even if they collect $1 out of every $100 worth of debt that they acquire, they will still turn out a profit.

The problem with this practice is that its success is based on the fact that a lot of people don’t know enough about the statute of limitations. Every state has a statute of limitations on credit card debt, and knowing what kind of protection is available to you can go a long way towards avoiding you a lot of trouble and saving you a lot of money.

Specifically, the statute of limitations (sometimes incorrectly referred to as the statue of limitations) refers to a time limit after which a creditor has no legal grounds to go after you for a debt. This period is usually calculated from your last payment on the credit card or the last activity date, which is the last time you used the card. Keeping this in mind is very important.

Your state’s attorney’s office will allow you to verify the statue of limitations within your state, but in a nutshell, here’s what you need to know:

After a certain amount of time, a debt collector has no legal right to come after you for a debt. That amount of time varies by state.
Since the statute of limitations is usually calculated from your last payment, when you make a payment you essentially restart the clock and make your delinquency recent, and are no longer protected by the statute of limitations
Once you lose that protection, you can now be sued for that debt because of that payment. You also send a signal for other creditors to come at you, since you’re now (in their eyes) an easy target
Ignore debt collectors’ calls. In some jurisdictions, even acknowledging the debt is yours can reset the statute of limitations, so your best bet is not to talk to debt collectors until you’ve thoroughly researched what you’re supposed to do in your specific situation
You can write them if they keep calling you. Make sure you send it certified mail, return receipt requested. By federal law, they have to stop calling you once you ask them to. Very important: make sure in the letter you specifically say that you aren’t acknowledging you owe the debt.
Get a no trial free credit report to monitor your credit and see if they’re not incorrectly reporting your old debt in order to hurt your credit score and leverage a payment out of you.
Finally, if it turns out that the statute of limitations hasn’t expired, then you’re going to need to negotiate your credit card debt, but you need to do so carefully, after thorough research and (sometimes) getting a lawyer’s advice.