Unpaid Debt

What happens if a credit card balance goes unpaid? If you aren’t receiving collection calls, does it mean the debt is no longer a problem?

All states have statute of limitation laws setting a time when a debt can no longer be collected. Credit card debt is considered open account debt because the lender has the option to change the terms of the agreement at any time. Iowa law states open account balances can no longer be collected after 5 years from the last charge, payment, or admission of ownership of the debt in writing.

Once the original lender has exhausted their attempts to collect and elects to discharge the balance, the debt is sold to collection agencies. Timelines vary for when an account is sold, typically at 180 days.  Collection agencies will contact you and attempt to collect a settlement. If the agency is unsuccessful they may bundle the uncollected debts and sell it again to a different agency. Attempts to collect your debt can occur at any time in the five year period and can result in court action. If the debt results in a court judgement to pay, it is valid for 20 years. Iowa allows actions to be taken to renew judgements extending the time when active collection can take place.

Ignoring unpaid debt won’t make it go away. Resources that may help are available through the Iowa Attorney General’s office, the Consumer Finance Protection Bureau, the National Consumer Law Center, and local attorneys.



Joyce Lash

Joyce Lash is a Human Sciences Specialist in Family Finance who wants to keep you ahead of the curve on financial information.

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