If you default on a credit card debt, the late pays and charge off from the default will stay on your credit report for 7 years. What about the debt? Once it comes off your credit report, do you still owe it?
Credit Reporting Confusion
A common misconception exists that credit card debt you owe disappears after seven years when it disappears off of your credit report. In reality, credit card debt you left unpaid does not go away. However, a creditor has a limited time in which to sue you for the debt, called the statute of limitations. More about the statute of limitations later in this post.
Who Owns Your Delinquent Debt After 7 Years?
It’s unlikely that your original credit card company still owns your debt after seven years. Credit card companies charge off bad debts after 180 days and sell or assign this debt to collection agencies. Over time, your unpaid debt can pass to multiple collection agencies. During the account transfer process, collection letters and calls may stop temporarily. That does not mean that your debt disappeared. It merely indicates that your account is undergoing yet another transfer. Collection agencies have been known to pursue debts over 20 years old, though this is technically illegal once the statute of limitations is over.
Statute of Limitations
Your state’s statute of limitations for debt collection dictates how long a collection agency or credit card company has to file a lawsuit against you for your delinquent credit card debt. Creditors lose their legal right to take you to court for the debt, but will still try to persuade you to pay off your defaulted credit card balance voluntarily. The statute of limitations for credit card debt collection in most states is less than seven years. To see our chart on when statute of limitations are up for each state, see our statute of limitations chart.
When the statute of limitations expires, technically that does not mean that your obligation to pay off your debt also expires, though this is a grey area legally. Many states classify debt on which the statute of limitations has expired as “zombie” debt. Some state attorneys general have prosecuted collection agencies for going after “zombie debt” from consumers. I think you can safely say that once a statute of limitations is up, the debt is expired.
If a Debt is Past the Statute of Limitations, Why Can’t I Remove it From My Credit Report?
A credit report does not list current valid debts for consumers, it reports on payment history. The Fair Credit Reporting Act says a delinquent account stays on your credit report for for 7 years from the first time you missed a payment on of the debt. So even if a debt is expired, the payment history stays on your credit report for 7 years.