How Long Does A Creditor Have To Sue On A Credit Card?
In Florida, there is a time limit for how long someone can enforce or collect upon a contract. That includes contracts between creditors, such as credit card companies, and a debtor. But how long does a creditor have to collect on a debt? In other words—how long is the Statute of Limitations (SOL) for the collection of debt?
What is a Statute of Limitations?
A statute of limitations is simply the maximum amount of time that someone has to file a lawsuit. The time limit will vary depending on the type of lawsuit—an injury case and a business case and a fraud case may all have different time limitations.
When it comes to credit card debt, or collection lawsuits, the answer to the question of how long someone has to file a lawsuit—that is, how long can a creditor legally sue you for debt–is more complex than you may think.
The problem is that in most cases, you sign some kind of agreement when you take out a loan, or borrow money, or open a credit card. That agreement has a choice of laws forum. In most cases, creditors choose to use laws in states that give creditors the most time to file their lawsuits.
Choice of law forum clauses are valid and binding, and they override Florida Law, which limits creditors to four years to sue. So, if your Best Buy retail card agreement chooses the law of Montana, Montana’s Statute of Limitations applies, even if it is longer than Florida’s.
When the Clock Begins
Importantly, the statute of limitations generally begins on the date that you made the last payment. Many consumers, in efforts to be nice, or show good faith, make tiny payments to creditors. These payments do nothing to reduce their balances—they’re so small, they are just paying off the tiniest but of interest—but the payments are actually giving the creditor more time to sue you.
Oral agreements are valid and binding agreements, which also have an SOL of four years. In some cases, oral promises to pay a debt can also extend (renew the start date of) the statute of limitations. Promising a creditor you will pay a debt, or orally agreeing to a settlement amount, will renew (extend) the statute of limitations. If you want to resolve a debt, you are welcome to do so—just be wary that you are not using language or signing documents that extend the creditor’s right to sue you.
Bankruptcy and the SOL
Bankruptcy doesn’t care about the statute of limitations. Whether the debt is old or young, if it’s dischargeable, it will be discharged. However, in Chapter 13, showing debt is too old, can lower your plan payments, so it’s good to understand how old your debt is.