How old debts can lead to seized assets
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). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
A credit card company emptied my bank account last August of
over $400 for a debt from 2001. That's when the credit card account was opened. They are now saying that the district court granted
permission to attach my wages. This debt is 12 years old, so how is that
possible? Do you have any advice? Also, I have no wages to attach.
Unless you immediately ran up the total balance when you
opened the card 12 years ago and haven't done anything to restart the statute
of limitations since, this debt may not be considered as old as you think it is.
People often assume that a debt is as old as the account, or
at least as old as the last time they used it. However, the statute of
limitations generally starts on the date of last activity, which is a bit
harder to figure out.
A number of things can restart the clock for the statute of
- Making a payment on the debt.
- Admitting on the phone or by mail that the debt is yours.
- Agreeing to a payment plan.
- Making a new charge on the account, no matter how small.
To find out if this debt is past the statute of limitations,
look up the statute of limitations in your state. Generally, the laws of the state you lived in when you signed the contract
apply. However, in some cases the laws of the issuer's home state apply
Next, you need to know when the date of last activity was on
your account, as reported by the creditor. You can find this by looking on your
credit report, which you can pull for free once a year from one or all of the
top three credit bureaus (Equifax, Experian and TransUnion) at
AnnualCreditReport.com. The creditor can also tell you this information, but be
very careful when talking to them. Make it very clear that you are not
affirming the debt or agreeing to anything by discussing it, or you'll start
the clock all over again.
If the account truly appears to be beyond the statute of
limitations, you still can't just ignore it. Creditors will try to sue you for
long-ago debts, and if you don't show up in court or prove that the debt is
past the statute of limitations, you can lose the case. That appears to be what
happened to you.
If the court ruled against you because you didn't respond,
or perhaps you didn't receive the notice, you may be able to reopen the case
and prove that it is past the statute of limitations. On the other hand, if it
turns out that the debt is not past the statute of limitations, for example, if
you made your last payment or purchase just a few years ago, you'll have to
deal with the debt differently. In either case, I recommend you get legal
advice in your state, perhaps from a low-cost legal assistance program, for how
to deal with and resolve the debt.
After the creditor attaches your income or assets, it's too
late to negotiate a payment plan directly with the creditor. You'll have to
deal with the court if the garnishment makes it difficult for you to live or to
pay your other bills.
Don't be tempted to
ignore this debt further by the fact that you have no wages. An ignored debt will be waiting for you, growing all
the time, until you do have wages or the collector finds some other income or
asset of yours to satisfy the debt. It's
always better to face the problem, so you can move forward without carrying the
burden of unresolved debts and judgments.
See related: Old debt brings new collection effort: legal?, Pros and cons of paying off an old debt
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