In any serious credit card debt dispute, it is wise to talk to an attorney before taking action.
To get through the recent difficulties in our economy, many people had to turn to credit cards to meet their needs. Of course, even in good times, a person or family can experience an unexpected emergency like illness or disability, natural disaster, job loss or death that leaves no other financial option than running up credit cards. Virginians have not been immune. According to ValuePenguin, in 2017, the average credit card debt in the state is $7,196, ranking 10th among the states.
However, state and federal laws provide some protections to credit card debtors if it becomes difficult to make payments.
Statute of limitations
One of these is called the statute of limitations, which is a deadline beyond which a valid lawsuit to try to collect on credit card debt is no longer available. In response to a suit for a credit card delinquency after the statute of limitations has expired, the defendant can assert the statute of limitations as an affirmative defense and normally the case would be thrown out.
Statutes of limitations vary by state and by type of claim. In Virginia, the deadline to sue for credit card debt is normally three years if there is no written contract and five if an adequate signed contract exists.
Even if you live in Virginia, however, it is possible that the statute of limitations of another state may apply. For example, the credit card account agreement may designate that the law of another particular state applies, usually the state in which the credit card company is headquartered or incorporated.
Collection after the statute of limitations expires
Even if a lawsuit on credit card debt is time-barred, the debt still technically exists, but it cannot be collected through a lawsuit. The credit card company, a collection agency it hires or a third party company that has bought the debt from the credit card company may still try to collect it from the cardholder. In Virginia, it is illegal to try to collect on it by threatening to sue after the statute of limitations has passed, but it is still allowable to send the accountholder dunning letters.
These are written notices sent to the consumer reminding that the debt is overdue and asking for payment. They may also include information about late fees and additional interest accrued. Dunning letters tend to be computer generated and not personalized and may be sent on paper or electronically. Several may be sent in succession on the same debt with a variety of tones.
It is important to remember that if you are being peppered with dunning letters on an old credit card debt (or receiving phone calls) that if you make a payment and the statute of limitations has not yet run, you will start it over. It usually starts running from the last payment, so if that was two years ago and the statute of limitations is three years, a new payment would restart the time count. On the other hand, if a payment is not made at this point in time, you are a year from the debt becoming time barred, rather than facing another three-year period before the statute of limitations expires.
The old debt may still hurt your credit rating, but you may decide to let the debt go after the statute has run. A decision like this merits contacting a lawyer to make an informed choice based on all the potential ramifications.
Get legal counsel
A consumer facing these kinds of decisions should speak with an experienced consumer protection attorney to understand the legal issues and the choices available. Every situation can be different because of the credit card contract, the actions of the parties and the laws that apply.
Other legal options may include a lawsuit for damages under the Fair Debt Collection Practices Act or FDCPA. This federal law makes it illegal for debt collectors to engage in abusive conduct toward debtors even if trying to collect valid debts. For example, it outlaws harassing calls and other communication, profanity, and extreme or untrue threats. If a debt collector sues you, or threatens to sue you, on a time barred debt, you may have a claim against them for violating the FDCPA.
Finally, another legal option may be bankruptcy, which may discharge some or all credit card debt or establish a three-to-five year payment plan for all debts that reduces the payment amounts to something doable, followed by partial discharge, depending on the type of bankruptcy filed and the individual situation.
Even bankruptcy can be legally complex when it comes to credit cards. The U.S. Supreme Court recently decided Midland Funding. LLC, v. Johnson, which held in May 2017 that if a creditor files a claim in a bankruptcy proceeding and the statute of limitations for that debt has expired, it would not violate the FDCPA, even though the debt is uncollectable in a lawsuit.
This case underscores the need for experienced legal counsel who carefully follows important developments in the law affecting credit card debtors.
Consumer rights attorney Tom Breeden of the law firm of Thomas R. Breeden, P.C., in Manassas represents credit card holders and other consumers across the state.