The statute of limitations on debt varies from state to state
By Sally Herigstad
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006).
Dear To Her Credit,
I have an 8-year-old, $8,000 credit card debt from when my son
used my card nine years ago and never paid me back. I am on Social Security,
and the credit card company says they are going to freeze my account and take
me to court.
Can they do that? I live almost in poverty now. I do not see how
I can pay this 8-year-old debt. Please advise me. -- Deb
Dear Deb,
Most retirees get about $1,000 in Social Security benefits per
month -- hardly enough to pay living expenses and try to pay off an $8,000 debt. Fortunately, the law is on your
side. In fact, two laws may be on your side!
First, no matter what bill collectors say, by federal law they
can't take your Social Security benefits. Even if they got a judgment against
you, they couldn't attach it to the payments you receive from the Social
Security Administration every month.
Second, you may not have to pay this debt because the statute of limitations in your state may have run out. In other words, the debt may be
too old to collect. CreditCards.com recently researched the statute of
limitations laws in all 50 states. The research allows you to look up your state's limit, and links to each state's statute, too.
At first glance, it doesn't make sense that a debt "expires"
when it's not paid. However, if there were no statute of limitations on debt,
someone could say you owed something from any time in the past -- even 30 or
more years ago -- and you might think you had to pay it. After so many years go
by, your chances of having good records of the debt or even remembering what
you owed become slim. The statute of limitations keeps you from being at the
mercy of creditors, scrupulous or otherwise, who want to dredge up old debts
from the past.
The length of time it takes for your credit card debt to expire and
when that time period begins depends on your state law. In many states, old
credit card debt expires in six years or so. The period of time begins the last
time you made a purchase or a payment or the date the credit card company
charged off the debt. That means, if there has been no activity on the card for
eight years, the debt is probably uncollectible. Check with the laws of your
state to be sure.
Warning! Do not make even the smallest payment on this
debt if you think it may qualify under the the statute of limitations. You may inadvertently
restart the time period by doing so.
Even though bankruptcy may look like an easy way out, don't even
think about it over an $8,000 debt. Bankruptcy easily costs several thousand
dollars by the time you pay all the fees -- and you will have to come up with
that money from somewhere. It would be a shame to file for bankruptcy over
debts that can't be collected anyway. If you don't have assets or income the
creditor can get to, there's nothing they can do.
You do need to get the credit card company to stop calling you
and causing you distress. Collection letters are bad enough, but collectors say
things on the phone that they would never put on paper, and sometimes their
tone of voice can really rattle a person. Collectors ask questions and put you
on the defensive, and sometimes finagle more information out of you than they
should have. They'll keep trying to collect, even if they know they don't have
a case. That's their job.
Tell the credit card company to stop calling you and to contact
you only by mail. They must comply. Then, when they send you something by mail,
reply in writing and explain why you are not paying. Don't let them pressure
you into paying with money you need to live.
Sally Herigstad writes about women and credit every week for CreditCards.com. Herigstad is a writer and finance consultant for MSN Money, a personal finance software product. She is also a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants. Her Web site is http://helpicantpaymy bills.net. Sally Herigstad lives in Kent, Wash., with her husband Gary. They have two grown children, Valia and Grant.
To Her Credit answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to Sally.
When debt collectors don't play by the rules – When debt collectors don't reveal how much you owe, you have rights under the Fair Debt Collection Practices Act to find out how much you owe, how much you paid and what your interest rate is. ...
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