When Does the Statute of Limitations on Credit Card Debt End in California?

In 1978, the Supreme Court made a ruling that would change the face of how banks dealt with credit card interest. The Marquette Bank opinion permitted national banks to export interest rates on consumer loans from the state where credit decisions were made to borrowers nationwide. Existing federal rules required a formal invitation to be issued by the legislature of the state the bank wanted to enter before banks could set up operations outside their home state.

It wasn’t long before states like South Dakota and Delaware took full advantage of the new jobs the banks offered. South Dakota’s legislature first passed laws in 1980 effectively eliminating their existing usury laws so Citibank could move their credit card operating headquarters to the state. Citibank eventually delivered 3,000 high paying jobs to the state that rewarded them with an operations base and ignored all the other state’s maximum usury rates to operate their business.

In 1980, Washington began a move, led by the Office of the Comptroller of the Currency, to peg the rate of interest at a certain number of points above the Federal Reserve Discount Rate. Specially chartered organizations like small loan companies and installment plan sellers would have their own rules. That means the usury laws in most states do not have enough teeth to regulate credit card debt today. As a result, many people have difficulty eliminating credit card debts with exorbitant interest rates and are faced to file bankruptcy.

Credit card debt is one of the leading reasons people file for bankruptcy protection, but if you are “collection proof,” meaning you do not have enough assets creditors can get hold of to satisfy debt, you may not need to file for bankruptcy protection at all. All states have a statute of limitations on debt collection.

Statute of limitations are basically broken down into debt categories including open-ended accounts, oral contracts, written contracts, and promissory notes. Statute of limitations in California carry a term of four years on open-ended accounts, two years on oral contracts, four years on written contracts, and four years on promissory notes.

Going to court and winning a judgment against a debtor is another matter. A judgment in California carries a statute of limitations of 10 years, but the limit can be renewed in order to extend the lien. The judgment can carry interest of 10% per year until the lien is satisfied.

Not all collection agencies play by the rules. Often, many will call after the statute of limitation and try to get you to acknowledge you owe the debt. In some states, if they can get you to acknowledge your debt and it is a qualifying debt like a credit card debt, the statute time for limitations may begin afresh from that day forward. In California, the statute of limitation is stopped only if the debtor makes a payment on the account after the expiration of the applicable limitations period.

The Fair Debt Collection Practices Act (FDCPA) protects consumers from unscrupulous collectors by providing a fair playing field in debt collections. The FDCPA states all collection agencies must verify any debts they claim you owe. If a debt is out of the statute of limitations or is unverifiable, the collection firm is prevented from pursuing the loan in any harassing manner. Continued violations could result in fines for the violators and requied payment for court and attorney fees.

If you have assets to protect from creditors seeking to get a judgment and your debt has not reached the statute of limitations, you may need to file bankruptcy.

If you need relief from the stress of debt and you live in or around the metropolitan areas of San Francisco, California, contact us at www.betterbankruptcy.com .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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