What Is the Statute of Limitations on Credit Card Debt in California?

Did you know that your credit card company is within the jurisdiction of the law to sue you within four years of your loan default?

According to Investopedia, a statute of limitations is a law that declares the “maximum time the parties involved have to initiate legal proceedings from the date of an alleged offense, whether civil or criminal.”1. However, there are certain things that you or the creditor can do that could reset or even extend the statute of limitations. Each time a consumer takes out a debt, he/she is making a contract to pay the debt on time in exchange for the credit. In such a case, the statute of limitations begins to run when the contract is said to be breached or broken. As a consumer, when you are not paying the debt, the contract between you and the creditor is breached2.

States may differ on when the breach is said to technically occur and usually, the contract is said to be breached, not when a payment is missed, but when the account is charged off, that is, 180 days of the delinquent. Thus, if you are being sued for breach of contract and you want the statute of limitations to be in your defense, you have to figure out when the last payment was made. In order to avoid giving the credit company a reason and perhaps more time to sue you, it is important that you understand how the statute of limitations works in the state of California.

California’s Statute of limitations for Credit Cards

Basically, all the consumer debts, from the credit card balances have limits on the number of years the creditors have a legal right to sue for the payment. The law dictates that where you live has an influence on the statute of limitations on particulate debts, even if the debts were incurred somewhere else. Some states dictate that the statute of limitations for credit card debt3 is up to 3 years, some 10 and in our state (California) it is up to 4 years. However, some of the creditors will add clauses to their terms of agreement stating that a specific state’s law will govern the contract regardless of where the consumer lives4.

Therefore, you have to be careful if the debt collectors are hounding you because making even a single payment to the debt can reset everything, giving the credit card company the power to sue you. Under the law, the debtor does not need to pay a time-barred debt, that doesn’t mean that the debt has disappeared after the statute of limitations expires. The debt remains, but you have a legal defense against the creditor’s claim. The statute of limitations for a credit card debt depends on whether the agreement governing the credit card is a written or unwritten contract or just an open-end contract5.

These two types of contracts exist in California and therefore, the statute of limitations for each is different. For the written contracts, the statute of limitations is up to 4 years and virtually, all the credit card agreements will fall under this category. Therefore, the credit card company will dictate the terms of the agreement in writing and when you sign the document, you will be accepting all the terms stipulated by the credit card company.

On the other hand, for the oral agreements, the statute of limitations is up to 2 years and it is very unlikely that the credit card company will agree to an oral contract. This simply means that you entered a contract with the credit card company but did not write or specify the terms of the agreement.

Activating the statute of limitations

When a cause of action accrues, that’s when the statute of limitations clock starts ticking. Simply, this is when you have breached the contract. Breaching of the contract could occur due to a variety of reasons and not making payments in time is one of them. Doing something contrary to what you agreed upon is also a breach of contract, no matter how insignificant the action might seem. The statute of limitation might start running on any one of these events;

  • The due date of your missed payments
  • The date of your last purchase
  • The date of your last payment.

If using one of the dates cause the statute of limitations to expire before the creditor makes a lawsuit, it is worthwhile to contact a legal counsel to review if the start date will apply to your situation.

Calculating the statute of limitations might not be as straightforward as you may take it to be, the creditor might be taking an action that might inadvertently lead you to take any action that changes the time the company is required to file a lawsuit against you. Therefore, be aware, if you are unsure about the statute of limitations as it applies to your situation, it is always good to seek legal professional advice.

Extending the statute of limitations timeframe

At times, the credit card company might take an action that temporarily stops the running of the statute of limitations or delays the time it begins to run. For instance;

  • When your credit card company gives you additional time to pay; this might extend your statute of limitations by delaying its start date.
  • When the statute of limitations is tolled due to unusual circumstances; you will find that there are times when the statute of limitations has already begun running but stops for a period of time. This can happen when the person with the right to sue is affected by the ‘unusual circumstance’. When the special circumstance is over, the statute of limitations goes into effect.

With the credit card contracts, you make periodic payments and because of this, you have to be very careful that you don’t reset the statute of limitations period without intending to. Once the payments stop, the statute of limitations goes into effect, but if you are consistent with the payments, the statute of limitations downs to zero.

Why the statute of limitations is important

Before forcing you to pay your credit debt, the credit card company has to first sue you and get a judgment. If given the judgment, the creditor has the power to take out money on your paycheck, called garnishing your wages and the power to take money out of your bank account, called levying against your account. If the creditor does not sue you by the statute of limitations deadline, it forever loses the right to get a judgment.

California’s economy is increasingly becoming pricey and volatile; however, your efforts are making the state become stable. Housing costs are likely to become a never-ending problem, but the mortgage debt has dropped quite significantly-17% in the last five years. The credit card debt is also down to 20% within the same period and residents have shown the dexterity to get better at managing debt and dealing with credit problems.

With that out in the open, if you need help with your credit card management or understanding your report, do not hesitate to contact The Power Is Now Media. We are first time home buyers and homeownership advocates in California. We also have VIP Agents stationed all across the state and a network of other real estate agents other parts of the country. To see the VIP agents in your area, visit our VIP agent’s page at https://thepowerisnow.com/vipagentsservices/. If you’d like to keep yourself with up to date with the current developments, visit our blogs page at https://thepowerisnow.com/blog/. In addition, if you’d like to set an appointment and speak to me directly, use the following link, https://calendly.com/thepowerisnow/ericfrazier

Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent views of First Bank or any organization affiliated with Eric Lawrence Frazier or the Power Is Now Media Inc.  First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier MBA is also a Vice President and Mortgage Advisor with First Bank.  NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email:  Eric.frazier@fbol.com.  Ph: 714- 475-8629.

 

Eric Lawrence Frazier MBA
President and CEO
The Power Is Now Media Inc.

 

Sources & Works Cited

https://www.nolo.com/legal-encyclopedia/what-is-the-statute-limitations-credit-card-debt-california.html

https://www.nerdwallet.com/blog/finance/statute-limitations-debt/

https://www.sfbay-law.com/the-four-year-statute-of-limitations-as-applied-to-debt-collection/

https://www.investopedia.com/terms/s/statute-of-limitations.asp

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