For debt collectors and creditors there is a designated amount of time that they have to pursue debtors to collect unpaid money. This set time frame is referred to as the statutes of limitations. Each state sets out their own statute of limitations to safeguard people from being sued long after their proof has disappeared. For those who have unpaid debt from their credit cards should be knowledgeable about their states statutes of limitations.
The U.S. Federal Trade Commission (FTC) has this to say regarding the statute of limitations in most states for unpaid credit card debt, “In most states the statute of limitations period on debts is between three and 10 years”. Those debts that have gone passed the statutes of limitations are called time-barred debts.
What Is a Time-Barred Debt
The Federal Trade Commission states that if you are taken to court for debt that is time-barred the judge can dismiss the case if you let him or her know that your debt is time-barred according to the state statute of limitations. You should be aware that time-barred debts do not stop creditors from trying to recover the unpaid debt. The time-barred debt status simply means that they cannot sue you to retrieve the unpaid money. Also be cautioned that your debt will not disappear because it has been time-barred, you still owe that money, and you just can’t be sued for it. There are many court sent notices that go ignored when it comes to old debts and those consumers often lose the court case against them, when they fail to mention that the statute of limitations has been surpassed. In fact in the state of Texas it is the debtor’s responsibility to prove that the debt is time-barred. Associate lawyer, Mary Spector advises that one should not pass of the collection notices that are sent, instead make sure to obtain a consumer lawyer.
Be warned that no matter what the statute of limitations is in your state, court rulings may supercede them, and take precedence. CreditCards.com took the liberty of closely looking at the statutes and judicial thoughts, and also spoke with experts in the law for each of the 50 states. In almost all states there is a clear statute of limitations. For the other states there was less clarity. There was no clear cut answer and there were noted conflicts between what the state laws and court proceedings, as well there was confusion in the state law itself.
The confusion that ensues over whether or not credit card debt has reached the time-barred status occurs because the laws put in place by the state have to be clarified by the judicial system. The clarifications may be altered with the passage of time, and since they are enforced on an individual case level, it is difficult to keep them sorted out.
The federal section of the government designated to deal with credit collectors is called the Fair Debt Collection Practices Act. This act states when legal action can be taken and is in charge of stating how and when collectors can reach debtors for unpaid money.
There are some credit cards who have agreements in place that state that no matter where the card holder lives the statute laws of will be in the home state of the card company. This means that a person could live in Maine, but if the company of the credit card is in Delaware, the statute followed will be the Delaware statute.
Be aware that just because the statute of limitations has run out, it does not mean that this unpaid debt is wiped away from your credit report. For example if you have claimed bankruptcy that is on your credit record for 10 years no matter how long ago the statute ran out. Additionally, when a creditor successfully wins a judgment against you for payment that will remain on your record for 7 years.
An important factor to know is that the statute of limitations usually begins at the time when the credit account becomes behind in payments, or the time of the last payment.
Re-aging refers to the practice of the statute of limitations starting all over again if even one payment is made on the debt, no matter what the amount. To avoid restarting the statue and giving creditors the opportunity to sue for unpaid amounts, many advocates recommend that debtors do not take acknowledgement of past debts. Any act of acknowledgement or payment on debt could make the debt collectable again, and instead you should make it known to the collector that you do not recognize the debt, or asking them to verify the debt. This could be done by writing a letter to the collections department.