What Is the Statute of Limitations on Credit Card Debt in California?

In most cases, your credit card company must sue you within four years of your payment default.

By , Attorney

A statute of limitations is a law that tells you how long someone has to sue you. In California, most credit card companies and their debt collectors have only four years to do so. Once that period elapses, the credit card company or collector loses its right to file a lawsuit against you. However, there are certain things that you or the creditor might do that could reset or extend the statute of limitations. In order to avoid giving the credit card company more time to sue you, it's important to understand how the statute of limitations works in California.

What Is the Statute of Limitations?

Your credit card company or debt collector must sue you in court within a certain amount of time, called the statute of limitations, or it loses its right to force you to pay your debt. Each state makes its own laws regarding how many years your creditor has to file a lawsuit against you.

California's Statute of Limitations for Credit Cards

In most cases, when you get a credit card, or sign any other type of credit agreement, you enter into a contract with the creditor and agree to make a monthly payment (which includes interest) until you repay the borrowed amount. There are two types of contracts in California – written contracts and oral contracts – and the statute of limitations is different for each of them.

Four-year statute of limitations for written contracts. Virtually all credit card agreements are written contracts. This means that you and the credit card company put the terms of the agreement in writing. Often, you agree to the contract terms listed on the credit card application when you sign it. In California, the statute of limitations for a written contract is four years.

Two-year statute of limitations for oral contracts. It is unlikely that your credit card agreement is an oral contract, meaning that you entered into a verbal agreement with the credit card company and did not write down the terms. If it is, however, the statute of limitations for an oral contract is two years.

When Does the Statute of Limitations Start Running?

The statute of limitations clock starts ticking when a cause of action "accrues." This usually means when you "breach," or break, the contract by not doing something you agreed to do, such as missing a payment.

In California, the statute of limitations may start running on any one of these three events:

  • the due date of your missed payment (this is the most likely starting date)
  • the date of your last purchase, or
  • the date of your last payment.

In most cases, the statute of limitations calculation starts when your first missed payment becomes due. In some cases, however (the details of which are beyond the scope of this article), the statute begins running on either the date of your last purchase or when you made your last payment. Since these dates often occur close together, in most cases, it doesn't make a difference. If, however, using one of these dates causes the statute of limitations to expire before your credit card company filed its lawsuit, it may be worthwhile to contact legal counsel to see if that start date applies to your situation.

Beware: Extending, Reviving, and Waiving the Statute of Limitations

Calculating the statute of limitations is not always easy or straightforward. The credit card company might take an action or you might inadvertently do something to change how much time the company gets to file a lawsuit against you. Because some of these issues can be tricky, if you are unclear about the statute of limitations period that applies to your case, you should consult with a legal professional.

Extending or Tolling the Statute of Limitations

Sometimes the credit card company does something that temporarily stops the running of the statute of limitations or delays when it begins to run.

Your credit card company gives you additional time to pay. If your credit card company gives you additional time to make your payment, this might extend the statute of limitations by delaying its start. For example, if you miss a payment on January 1, your creditor may extend your payment due date to April 1. Even if you never make that April 1 payment, the creditor could later argue that the additional time it gave you to pay extended the start date of the statute of limitations to April 1.

The statute of limitations is "tolled" due to unusual circumstances. There are times when the statute of limitations has started running, but then is stopped ("tolled") for a period of time. This can happen if the person with the right to sue is affected by an unusual circumstance, for example, he or she is legally insane, incarcerated, or away at war. Once the special circumstance is over (for example, the creditor gets out of prison), the statute of limitations starts running. Tolling rarely happens with credit card companies.

Reviving the Statute of Limitations

With credit card contracts, it is normal to make periodic payments. Because of this, you have to be careful that you don't reset the statute of limitations period without meaning to.

You make a payment after not paying for a period of time. Once you stop paying, the statute of limitations begins running. If, however, you make a payment down-the-road, the statute of limitations resets to zero.

No reset if your credit is revoked. The "reset" rule only applies if you still have a useable account. Once your credit card company closes your account, if you make a payment, the statute of limitations does not restart.

Waiving the Statute of Limitations

While you cannot verbally agree to waive the statute of limitations, in some cases you can agree to waive it if you put the agreement in writing. As such, it is a good idea to carefully read anything your credit card company asks you to sign.

You waive the statute of limitations in writing. Before the statute of limitations runs out, the creditor may ask you to sign a document extending it for an additional period. If you sign such a document, the creditor gets additional time to sue you. There are limits, however, on the length of the extension, which is usually four years.

You make a new promise to pay in writing. After the statute of limitations expires, the credit card company may ask you to sign an agreement promising that you will pay the debt. You do not have to do so (and rarely would you want to). But if you do sign such an agreement it creates a new contract that obligates you to repay the debt. The statute of limitations on the old agreement is no longer relevant. If you you default on a payment under the new contract, the statute of limitations begins running from that date.

Why the Statute of Limitations Matters

Credit card companies and debt collectors must first sue you and get a judgment before forcing you to pay the debt against your will. A judgment is the court's way of saying that yes, you owe the money the creditor claims you owe, and an employer or bank requires this proof before handing over your money.

Once it has a judgment, a credit card company can:

  • take money out of your paycheck, called garnishing your wages (get the specifics on California wage garnishment law), and
  • take money out of your bank account (called levying against your account).

If a creditor doesn't sue you by the statute of limitations deadline, it forever loses its right to get a judgment against you and use the above means of collection against you.

Your Creditor Can Still Try to Collect in Other Ways

This does not mean the creditor has to stop calling you or cannot harm your credit, however – only that it cannot force you to pay against your will. (Find out more information about what a creditor can and cannot do to collect a debt in California.)

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