Is it True that After 7 Years a Person's Credit Card Debt can be Wiped Out?

Personal credit card debt may be deleted after seven years under specific circumstances, but the outstanding amount due may still be payable.

Credit Reporting
Credit card companies, collection agencies and debt buyers can report delinquent credit card accounts and accounts that have been charged-off for up to seven years. Just after seven years, a person may legally have the credit reporting agencies remove the negative account listings, if they are not automatically deleted. All three credit reporting agencies offer online methods of disputing negative listings on individual credit reports. Although the credit card debt is deleted from your current credit file, the financial debt is actually still valid and collectors can still contact you in an attempt to collect.

Judgments
If a financial institution or debt collector files and wins a lawsuit for non-payment of a consumer credit card debt, the court will issue a judgment against the consumer. If you have a judgment against you, you may have your bank account levied, your wages may be garnished, your assets may be confiscated and your home may have a lien against it. Judgments also stay on a person's credit report for at least seven years, longer if your state allows it.

Restrictions
Each state provides a statute of limitations related to consumer credit card debt which is often categorized as an open account. This is the time frame in which creditors are allowed to file a lawsuit and possibly attain a judgment for the outstanding credit card balance, plus interest and fees. Statutes of limitations range from two to ten years for open account litigation; each state decides their own statute of limitations. Credit card debt, or open accounts, that are out of statute may still be reported to all three credit reporting agencies. The fact that they can no longer win a lawsuit against you does not negate the fact that you owe the debt.

Alternatives

Filing personal bankruptcy is one alternative to letting your credit card accounts lapse. Chapter 7 personal bankruptcy will wipe out your credit card debt; Chapter 13 personal bankruptcy will wipe out whatever credit card debt the court feels you are not able to pay-off in structured payments. Both types of personal bankruptcy remain listed on your credit file for up to 10 years, but each passing year lessens the impact. Creditors and collectors are not allowed to list the accounts outside of the bankruptcy and they must cease all contact regarding collections for the accounts