Credit Card Debt ~ Statute of Limitations

Q:    What’s the statute of limitation on a credit card debt?  I’m getting bills demanding payment on a card I haven’t used in years.  Isn’t there some limit on how long they can try to collect?

A:    If there’s a written contract, the statute of limitation is 10 years.  A creditor would then have 10 years from when you defaulted on the contract to file a lawsuit against you.  Default is usually your last payment.

The big “if” is whether there’s a written contract.  Or, rather, whether whoever sues you can prove there’s a written contract.  If they can’t, then it should be treated like an oral contract, and a 5 year statute of limitation.

As you can see, there are different statutes of limitation for different situations.  Some exotic cases have no limit at all.  In Illinois or Federal court, the time limit for filing a civil case can range from 1 to 75 years.

It’s important to note that the filing deadlines with administrative agencies are different, and can be much shorter.  For example, you have 180 days to file a discrimination complaint with the Illinois Human Rights Commission, or just 90 days to file with the City of Urbana Human Relations Commission.

In most debt collection cases in state court, the statute of limitation is 4, 5, or 10 years.  The 4 year limit applies to a sale of goods.  A car sale, for example, has a 4 year statute of limitation, measured from the date of default.

An unwritten (oral) contract has a 5 year statute of limitation.  That covers most informal IOUs.

Written contracts have a 10 year statute of limitation.  The law says this 10 year limit applies to “actions on bonds, promissory notes, bills of exchange, written leases, written contracts, or other evidences of indebtedness.”

A dirty little secret about credit card collections is that whatever written contract may have once existed isn’t around when the case gets to court.  Accounts are bought and sold many times, and along the way the documentation gets buried or destroyed.  One reason some debt buyers can pay only a penny or two on the dollar for bad credit card debt is that they get no supporting documents from the seller.

Illinois court rules say that if “a claim or defense is founded upon a written instrument,” a copy of that document “must be attached to the pleading as an exhibit.”  If not, the case can be dismissed.  Lots of credit card complaints are filed with no contract attached.

Some recent court cases have said that if there’s no proof of a written credit card contract, then it’s an oral contract, with a 5 year statute of limitation.  One case said that a signed credit card application is just a request for credit, and not a credit contract, and that monthly statements are just demands for payment, and not proof that any written contract exists.

So, if a creditor insists there’s a written contract but can’t produce it, their case should be dismissed.  As a fall-back position, they can treat it as an oral contract, with a 5 year statute of limitation.  Then, if you can prove it’s been more than 5 years since your last payment, you have a defense with a good chance of success.