What Does a State Statute of Limitations on Credit Card Debt Mean?

by John Barron

Overview

A statute of limitations on credit card debt specifies the time period within which a creditor must bring a court action against a debtor to compel payment of the balance owed.
Identification

Because the relationship between a credit card company and a cardholder is based on a legally binding contract, the specific statute of limitations for recovering credit card debt is determined by each state's limitations period established for breach of contract actions. Once the period for bringing a credit card action has expired, a debtor could raise the statute of limitations defense and any lawsuit filed would have to be dismissed.

Time Frame

The statute of limitations for a breach of contract action can vary from state to state. In some states the period is four years; in others, it is three.
Considerations

The statute of limitations usually commences from the time the credit card account was in default or was written off by the creditor.
Effects

Once the statute of limitations period has expired for bringing a breach of contract action for the balance owed on a credit card account, the creditor is absolutely barred from filing a lawsuit against the debtor.
Misconceptions

Expiration of the statute of limitations period for credit card debt does not extinguish the debt, it only precludes a creditor from bringing a lawsuit against a debtor for enforcement of the balance owed.