Statute of Limitations on Credit Card Debt

The statute of limitations (frequently abbreviated SOL) is a defense available to debtors that, when successful, defeats debt collection attempts by creditors.  The purpose of the statute of limitations, which is set out in various state and federal statutes and applies to many different types of civil and criminal litigation in addition to lawsuits over credit card debt, is to encourage creditors to seek remedy in the courts before evidence has been lost, witnesses memories have faded, and the parties have moved on with their lives.  Each state has a statute (or several statutes) which provide for the length of time that a creditor has to pursue a claim against an individual that owes them a debt. While the running of the clock for the statute of limitation does not prohibit a creditor from filing a lawsuit on an old debt to attempt to collect through the court system, it will bar recovery by the plaintiff when successfully asserted in court by the defendant allegedly owing money.

Unfortunately, the law regarding the statute of limitations defense is not as easy to understand and apply as it might be.  One it is possible to make an informed conclusion about which statute of limitations is likely to be applied by courts, a debtor isn’t truly safe from possible claims on the debt until the last statute of limitations has expired.  And even after you have exhausted the last statute of limitations period, it is possible that your actions could revive the legal claim and restart the running of the statute of limitations.

That’s simply one of the many reasons why you should hire an attorney to help you with your legal problems.

How to determine which statute of limitations law applies?

There are many factors in the determination of which state or federal statue of limitations law applies to a lawsuit over a particular debt.  Ultimately, the law of the state where the lawsuit is filed will play a large role in the selection of which statute of limitations provision governs.  That is one reason why it is important to be aware if their is a forum selection clause in your credit agreement.  (A forum selection clause will provide that the appropriate forum for disputes under this contract is the courts of the State of California, for example).

When you seek to determine the statute of limitations, consider that it may be selected among one of following states depending upon the laws of the court:

• If there is a choice of law clause in the contract, the statute of limitations of the state chosen may apply.  So be sure to check your credit card agreement, as well as all revisions and amendments, for a provision that states something like “The law of the State of New York governs this agreement.”
• The state where you currently live.
• The state where the agreement was formed.
• The state where the majority of purchases were made.
• The state where the credit card company has its operations.

Because of the many ways to calculate the statute of limitations, you probably shouldn’t consider yourself safe from lawsuit until the expiration of the last possible statute of limitations.

When does the Statute of Limitations begin to run?

Most laws begin the running of the statute of limitations when the legal claim accrues.  As the plaintiff can’t possibly bring a lawsuit before they are aware that they have been harmed, the statute of limitations frequently begins when the plaintiff discovers, or reasonably should have discovered, that they have a claim against the defendant.

Among the options for a court to choose when determining the start of the statute of limitations are the last payment date, the last activity date (your last charge to the credit card), or the first missed payment (after which you provided no other payments).  Of course, this assumes that you did not accidentally extend or restart the time for calculation of the statute of limitations (discussed below).

Can the Statute of Limitations reset?

Depending on the law of the state which ultimately applies to the lawsuit, you may inadvertently extend the statute of limitations if you acknowledge that you owe the debt, make an agreement to repay the debt on a payment plan, or make a partial payment on the old debt.  These actions can, depending on the relevant state law, create a new date for the running of the statute of limitations clock, even if the debt owed was no longer valid because of the passing of the statute of limitations.

What is the Statute of Limitations law for a particular state?

There are many lists of the time periods for the statute of limitations by state across the internet, and I won’t add to the proliferation of figures by adding another list here.  Just search for it on Google.

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