What Happens to Credit Card Debt After 7 Years?

Two different clocks apply to old credit card debt, and confusing them causes many mistakes.

Clock 1: Credit reporting (7 years)

Under the Fair Credit Reporting Act, accounts placed for collection or charged off generally cannot be reported for more than seven years, measured from 180 days after the start of the delinquency that led to collection or charge-off (15 U.S.C. 1681c(a)(4), (c)). Making a payment later does not restart this reporting clock.

Clock 2: Statute of limitations (varies by state)

Each state sets a deadline for suing on a debt, commonly from three to six years for credit card debt, though some states are longer. Once it passes, the debt is "time-barred."

• Debt collectors may not sue or threaten to sue on a time-barred debt (12 CFR 1006.26).
• In some states, making a payment or acknowledging the debt in writing can restart the statute of limitations, so be careful.
• If you are sued on an old debt, you usually must raise the statute of limitations as a defense in court; the court may not apply it on its own. See what to do if a debt collector sues you.

Does the debt ever go away?

The legal obligation generally remains unless it is paid, settled, discharged in bankruptcy, or extinguished under a state law. Collectors may continue to ask you to pay voluntarily, within FDCPA rules (FTC). See what debt collectors can legally do.

Should you pay an old debt?

It depends:

• If the debt is still within the statute of limitations, a lawsuit is possible.
• If time-barred, paying is voluntary; get any settlement in writing, and understand whether a payment could revive the deadline in your state.
• Paying may not change your credit report much if the account is close to the 7-year mark.

Canceled debt and taxes

If a creditor forgives $600 or more, you may receive a Form 1099-C, and the forgiven amount can be taxable unless an exclusion such as insolvency applies.

Options for current debt

Hardship programs, credit counseling, debt settlement, or bankruptcy. See debt settlement and Chapter 7.

A bankruptcy lawyer or consumer attorney can check the statute of limitations in your state.

Sources

1. Cornell Law School LII: 15 U.S.C. 1681c, Requirements relating to information contained in consumer reports
2. Cornell Law School LII: 12 CFR 1006.26, Collection of time-barred debts
3. Federal Trade Commission: Debt collection FAQs