Banking Category Banking: the easy, simple banking guide

Is Old Credit Card Debt Still Valid After Ten Years?

Defaulting on, and subsequently forgetting about, your credit card debt does not mean it eventually disappears. Credit card companies sell defaulted credit accounts to collection agencies. If a collection agency cannot locate you or recover the debt from you, it will eventually sell your account to yet another debt buyer. Debt collectors can buy and sell your debt indefinitely.

Debt Validity

Your credit card debt remains valid until you pay it off. The Fair Debt Collection Practices Act (FDCPA) grants third-party collectors, such as collection agencies, the right to add additional interest charges to a collection account if the original creditor also charged interest. Because of this, your defaulted credit card debt is not only valid -- it's likely much higher after 10 years than it was when you stopped making payments.

Statute of Limitations

Although you still owe your credit card debt, the statutes of limitations for collection lawsuits in most states range from three to six years. Thus, the collection agency's sole debt recovery option is to convince you to pay off the account balance voluntarily. It lacks the legal right to sue you, place liens against your property, or apply for a garnishment order from the court.

Paying Old Debt

While paying off old credit card debt is admirable, making even a small payment on the outstanding amount resets the statute of limitations -- once again leaving you vulnerable to a debt collection lawsuit. If you plan to pay off your 10-year-old debt, paying the account in full or via a lump-sum settlement saves you from opening yourself to a lawsuit in your attempt to satisfy old financial obligations.

Illegal Collection Methods

Although creditors face considerable legal restrictions when collecting old credit card debts, some unethical debt collectors prey on uninformed consumers by using illegal debt collection methods. For example, the FDCPA prohibits debt collectors from threatening to sue you if your state's statute of limitations has already expired.

If a collection agency follows through with a lawsuit for a credit card debt that is 10 years old, you must respond to the lawsuit and use your state's expired statute when presenting your case in court. Otherwise, the court has no way of knowing that the creditor lacks the right to sue and will award it a court judgment by default. Although you can dispute a collection agency's judgment using the statute of limitations, the judgment still gives the creditor lien placement and garnishment rights.