Debtors facing collections actions by creditors are often unaware of time limits concerning their delinquent credit card accounts and other debts. In the state of Texas, a creditor cannot sue a debtor for payment on a delinquent account four years after last payment. For example, if you last made a payment on a credit card in 2006, the creditors would only have until 2010 to sue you for the balance of the loan. That doesn't mean that the creditor has to stop pursuing you for payment; but it does mean that they can't use the court system to help them collect on the credit card debt. Also, the credit bureaus are only allowed to keep delinquent account information on your credit report for seven years from the first date of delinquency. What this means is that if you stopped paying your credit card in June of 2005, the credit bureaus would only be allowed to report that information until June of 2012.
Debtors should be aware of the following issues that often come up with old delinquent credit card accounts and other delinquent debts when they are nearing the expiration of the statute of limitations:
- Creditors will often file "midnight hour lawsuits" against a debtor whose delinquent credit card account or other debt is reaching the statue of limitations. The creditors file the lawsuit hoping that they will be able to win a default judgment and extend the time they can pursue the debtor for payment using the courts. Because many debtors fail to show up to court, many creditors are able to get default judgments even if the statute of limitations has expired.
- Making a payment and in some cases acknowledging that you owe the debt can reset the clock for the statute of limitations. This is why debtors who have delinquent credit card accounts or other debts should not begin making payments on the old account unless they are sure they can pay it off.