Editorial Policy

Can Credit Card Debt Expire?

Erica Sandberg

November 20, 2012

QDear Erica,

Is there a statute of limitation on debt? If so, what kind of debt? — John

ADear John,

While some mistakes trail behind us forever, most drop away at some point. Either we rectify the problems or they’re simply too old to hang on to any longer. A financial obligation is an interesting one, though.

In the majority of cases, holders of unpaid debt will eventually have to accept their loss if they don’t take some kind of action against an un-budging borrower. Still, there are a couple types of debt that cling on indefinitely.Ask Erica

First, let’s define “statute of limitations.” For this particular subject, it refers to a law that sets the maximum amount of time that one party can sue another for a delinquent debt. If the window of that time frame slams shut before the creditor begins a lawsuit, the debtor can no longer be taken to court for that particular debt.

There is another time frame to consider, however, and that’s the number of years that evidence of a debt can appear on a consumer credit report. Even if the statute for being sued has passed, the arrearage can still remain on your credit file. Typically this is governed by federal law — the Fair Credit Reporting Act (FCRA).

Here are the most common liabilities you might have, how long you can be sued for them and the number of years they could show up on your credit reports.

Unsecured debt
If the debt doesn’t have an asset attached as collateral, it’s unsecured (i.e., credit card debt). The statute of limitations for being sued for this kind of debt is state specific, and the number of years depends on whether it is for a closed-end account (like an installment loan) or open-end account (such as a credit card). For example, you could be sued for an unpaid Discover Card bill for anywhere from three years in Alabama to 10 years in Iowa.

The negative notation on your credit report will remain for seven years from the date of your last payment or when the creditor charged the debt off.

Secured debt
Debts that are secured with money or property are a little different, because the lender would not have to sue for the amount due — it would just take the collateral. For example, if you missed enough payments on a car note, the lender could repossess your vehicle, with no lawsuit necessary. Still, your state’s statute of limitations may go into effect if the car was sold at auction and you owed a deficiency balance, because it would then be a new unsecured debt.

Late payments would stay on your credit reports for seven years, and a repossession would remain for seven years from when the loan became delinquent.

Monetary judgments
If have been sued for a debt and lost the case, you’ll have a judgment to deal with. There is no statute of limitations in this case because you can’t be sued for the debt again. However, the judgment creditor can collect for as many years as your state permits, and can then usually renew the judgment for the same time frame. In California, for instance, a judgment creditor has 10 years to get you to pay, plus another 10 if your judgment gets renewed.

A judgment is listed in the public records section of a credit report for seven years from the date it was filed.

Student loans
There is no statute of limitations for federal student loan debt, as the lender can pursue you for as many years as the account is left unpaid. Delinquent private student loans are different and are subject to state law as an unsecured debt would be.

As far as credit report damage goes, a defaulted loan can show up for seven years. Interestingly, the Higher Education Act, not the FCRA, stipulates this time frame.

Child support arrearage
Dealing with back child support payments? Make them a priority. The debt will remain in effect until satisfied, no matter the age of the child. The party you owe can take legal action at any time, and if you refuse to pay, you may even face contempt of court charges and jail time.

This type of debt will stick to a credit report like glue: perpetually until cleared.

Tax debt
And then there’s the IRS. If you owe the government, you’ve got a lien, and they’ve got 10 years to wait it out and attempt to collect. If it can’t do so in that decade, the IRS will be forced to forget it.

An unpaid tax lien can remain on a credit report for up to 15 years. A paid lien will remain on a credit report for seven years after you send the money.

Finally, John, remember that, even if a financial obligation has passed the statute of limitations for a lawsuit or is no longer listed on a credit report, it’s still a debt until satisfied or forgiven.

Got a question for Erica? Send her an email.