How Your State Affects the Statute of Limitations
Figuring out which statute applies to your credit card debt isn't always straightforward.
For example, if a debtor lives in Florida and defaults on a credit card debt, a lawsuit will likely be filed in Florida. Most credit card agreements include a choice of law provision." This provision designates which state laws will apply if there is a dispute under the agreement, and it might not be the same as the state you live in.
Check your original agreement for language specifying a choice of state law or "governing law" that might apply to your debt. Although courts are not bound to this choice, it may impact which statute of limitations that courts may consider in their decision.
The statute of limitations on open-account debt, like credit cards, for Oklahoma is five (5) years.
Here is a chart of statute of limitations on open-account debt, like credit cards, for each state.
When Does the Statute of Limitations Start?
It depends on the state law that's used. In some states, the statute of limitations begins from the date of your last payment, while other states say it activates on the date you missed your first payment.
Creditors and debt collectors can file a lawsuit against you to recoup the debt before the statute of limitations expires. When this time frame is over, they can't sue you to collect on delinquent debt. However, they can still contact you to coerce you to pay.
"Some debt collectors who know that your debt has passed the statute of limitations will use especially aggressive tactics to try to trick you into making payments or to saying something which will restart the clock," Tayne says.
How to Avoid Resetting the Clock on Old or Time-Barred Debt
New activity on a time-barred debt account – such as making a full or partial payment, acknowledging the debt is yours, or promising to pay it – can restart its statute of limitations.
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If you want to avoid the threat of being sued for a time-barred debt, you'll need to avoid taking actions that inadvertently reset a new statute of limitations clock. Here are a few tips that experts recommend if you're contacted about a time-barred debt:
Ask if the debt Is time-barred. The Federal Trade Commission's Fair Debt Collection Practices Act requires a debt collector to respond honestly when asked whether a debt is time-barred. A debt collector can contact you about the debt but might not mention that the debt is time-barred or might choose not to answer you. If the collector confirms it's a time-barred debt, don't acknowledge the debt or agree to pay it.
Ask when the last payment was made. If you're unsure whether the debt is time-barred, a legitimate debt collector should be able to tell you the date the last payment was made. This information helps you determine when the statute of limitations might have begun on the debt.
Request a debt validation letter. Send your debt collectors a written request for a debt validation letter within 30 days of being contacted. A debt validation letter confirms specific information about the collector, the debt and your rights under the FDCPA. The creditor or debt collector is legally required to halt all collections on the debt until it has supplied a debt validation letter in writing.
Again, during this process, it's important to avoid acknowledging that the debt is yours so you don't potentially reactivate the statute of limitations.
Do You Have to Pay a Time-Barred Debt?
"Once a debt has passed the statute of limitations, you cannot be sued or threatened to be sued for your debt," says Tayne. "The decision to pay the debt then falls on you."
When your credit card debt is past its statute of limitations, you have a few options when it comes to handling the actual debt, according to the FTC:
- Don't pay the debt. If your debt is time-barred and the clock on the statute isn't reset, you can decide to not pay the debt. As a lingering delinquent debt, however, it'll stay on your credit report for seven years from the date of first delinquency before it ages out.
- Pay some of the debt. Technically, this is an option when addressing a time-barred debt, but it'll reactivate the statute of limitations. Taking this route may lead to further complications down the road if the debt collector chooses to sue once the clock resets.
- Pay all of the debt. You can choose to repay the debt to avoid prolonged damage to your credit score.
You'll want to know how keeping the ghost of a time-barred debt affects your long-term financial plans. Before making your next move, consider consulting with an attorney or nonprofit credit counselor to talk through your choices and determine which route is best for you.
If you feel that you're being illegally harassed about the debt, you have options:
Adapted for Oklahoma from this article by Jennifer Calonia What's the Statute of Limitations on Credit Card Debt?