In 1980, the federal government passed a special law which allowed national banks to ignore state usury limits and peg the rate of interest at a certain number of points above the federal reserve discount rate. In addition, specially chartered organizations like small loan companies and installment plan sellers have their own rules. That means that the laws in most states do not have enough teeth to regulate credit card debt. As a result in many cases, about the only way a person can relieve exorbitant debt from various banking institutions is through filing 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 four debt categories by law. These categories include oral contracts, written contracts, promissory notes, and open-ended accounts. The latter category deals with credit card debt.
For Virginia, the statute of limitations for oral contracts is three years, and written contracts is six years. The statute of limitations for promissory notes is six years, and the statute of limitations on open-ended accounts is three years from the last payment or last charge for goods or services rendered on the account.
Going to court and winning a judgment against a debtor is another matter. A judgment in Virginia carries a statute of limitations of 10 years. A creditor must renew a judgment before the time frame ends if they want to keep an attachment or lien alive. The judgment can be renewed to 20 years in Virginia.
Not all collection agencies play by the rules. Often, many will call you after the statute of limitation has run out of date and try to get you to acknowledge you owe the debt. 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 begins afresh from that day forward.
So, what you might want to do when these agents come calling is to ask them to send you paperwork to verify exactly what debts they claim you owe along with dates of the claimed debt. If it is debts that has passed the statute of limitations, you might want to get their mailing address and send them a cease and desist letter to stop collections. You can explain in the letter why you do not owe the amount. If they cannot verify the claim, you might want to send the collection agency a cease and desist letter anyway.
The Fair Debt Collection Practices Act (FDCPA) was passed by Congress to protect consumers by providing a fair playing field in debt collections that parallels both federal and state laws. The FDCPA states all collection agencies must verify any debts they claim you may 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 by collectors could result in fines for the violators, court costs, and attorney fees. That is the reason a cease and desist letter should be sent.
If you have assets to protect from creditors seeking to get a judgment and your debt has not reached the statute of limitations, your best bet to handle the situation is most often filing for bankruptcy protection. Bankruptcy laws can be complicated, and common sense indicates you might need a bankruptcy lawyer in order to help you understand how these complex laws may apply in your particular situation.
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