By Ryan C. Wood
So you are having trouble making your credit card payments and probably wondering what will happen next? The next few paragraphs will discuss the treatment and removal of unpaid credit card accounts based upon the Fair Credit Reporting Act and the statute of limitations under California law only. Each state has its own statute of limitations for causes of action like enforcing an unpaid credit card debt.
What is a Statute of Limitations?
The first issue is what is the statute of limitations? The statute of limitations is the length of time that one has to file a lawsuit to enforce a claim such as an unpaid debt, a personal injury cause of action or a products liability claim. When you sign up for a credit card, you are entering into a written contract agreeing to pay back the money you charge to the credit card under varying terms. When payment is not made, the contract is breached. In California the statute of limitations for breach of contract is four years.
When does the Statute of Limitations start?
Generally the statute of limitations begins to run when the cause of action accrues or begins. This is a complicated area of the law and this article will only touch on general information and not a case by case analysis your case may require. When the statute of limitation usually begins is when you breach the contract by not paying, or the cause of action accrues arising from the date of last payment or when demand for full payment is received. In California, pursuant to California Civil Code Section 337, the statute of limitations for breach of contract resulting from nonpayment is 4 years. In California, the statute of limitations can be extended only by a new agreement in writing to agree again to repay the credit card debt. If a credit card company does not file a lawsuit within 4 years from the date of last payment or when demand for full payment was received, and no new agreement in writing has been executed, the debt is then time-barred and is not legally enforceable. The only way the credit card company can then get a payment from you is if you voluntarily choose to make a payment. Some credit card agreements have an acceleration clause that must be invoked and once a payment is missed, then the statute of limitations begins to accrue.
What Happens if a Credit Card Company Does Not File Suit Within the Statute of Limitations and the Debt is Time-Barred?
There is also a statute of limitations regarding credit reports. The statute of limitations for reporting accounts and credit reports is controlled by the Fair Credit Reporting Act (FCRA). If a credit card company in California does not sue within 4 years and the debt becomes time-barred, it is still a negative account on a credit report though. Pursuant to the FCRA negative accounts can remain on a credit report for 7 years and positive accounts can remain for 10 years. There are some exceptions that are not listed here, so consult a professional in your state for the exceptions. If a credit card company does not sue to enforce the payment of the debt, the next step is to dispute the negative account with all three credit bureaus. The credit bureaus, Experian, Equifax and Trans Union are prohibited from continue to list old negative accounts on credit reports and must remove inaccurate item in 30 days. To dispute a credit account on a credit report you will need a recent copy of your credit report. There are a number of websites that will provide a free credit report. Then to dispute an item on a credit report, you may write a letter, file a dispute on-line at the credit bureaus website and even by telephone. Go to the Federal Trade Commission website at: www.ftc.gov/bcp/edu/pubs/consumer/credit/cre21.shtm.
If a credit card company unfortunately seeks to enforce a debt by filing a lawsuit, it is time to consult one of our best bankruptcy lawyers or experienced bankruptcy lawyers for advice. You may contact us toll free at 1-877-963-9543.