A statute of limitations for California Debt
Just like any other American state, Californians rely on credit cards to get by daily. These cards end up accumulating lots of debts for the cardholders. Apart from credit card debts, there are several other debts including student loans, auto loans, and mortgages. California is also one of the states that are known to enact laws to protect its citizens. There are several laws to this effect and some of the laws work alongside the federal laws. Some of them are also limited to California. For instance, the Federal Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from harassing borrowers, however, California has furthered that law. California’s law, on the other hand, prohibits anyone who collects debts from harassing the debtor. In this case, the federal law does not protect debtors against harsh treatments from creditors since it is only prohibiting debt collectors. California’s law protects debtors from everyone who collect debts, including the original creditors. The Act that is in charge of California’s consumer protection is the California/Rosenthal Fair Debt Collection Practices Act.
What is the statute of limitation?
A statute of limitation is the law that indicates the period of time for which a legal action can be taken against you when you owe debts. When the debt is older than the statute of limitation, the creditor no longer has the right to sue you for the payments. You may decide to pay it on moral grounds but you are no longer under any obligation. In California, the statute of limitation is 4 years. Which means that a creditor cannot sue you for a debt that is more than 4 years old. This law is applicable to only written contracts. In most cases, credit cards and other loan forms have written contracts. With credit cards, they will offer you the terms and you agree to it by signing. There is provision for oral contracts as well. The statute of limitation for oral contracts is 2 years.
A federal law, the Fair Debt Collection Practices Act makes this provision and any creditor who threatens to sue a borrower for a credit that is older than the statute of limitations violates this law.
When Did the Statute of Limitation Clock Start Running?
The clock starts running when you stop taking action on your debt. When you breach the contract, the clock begins to tick. The statute of limitation clock can begin to tick when you miss payments.
In California, the statute of limitation clock begins to tick on any of these three dates.
- The due date of you miss a payment.
- The date you made your last purchase.
- The date you made your last payment.
Although these are known the be the standard circumstances under which the statute of limitation clock starts ticking, it is not always the same. Checking the date that the clock began ticking may look straightforward due to the circumstances listed above, but it is not always the case. In some cases, you may need to professional to help you get the right date for your case. It becomes difficult to establish the right date the statute of limitation in some cases due to some actions that extend or toll the statute of limitation.
Extending or Tolling the Statute of Limitation
- If your credit card company gives you additional time to pay the debt
Sometimes, the credit card company or creditor may lengthen your repayment period by offering you an extra time to pay your debt. Once they have informed you about the additional time, it extends the statute of limitation. Even if you do not take any action around that period. For instance, if you missed a payment on February 5, 2018, and the creditor decides to give you up to May 5, 2018 to make payments. The statute of limitation gets extended by 3 months. The start date is now May 5.
- If the creditor encounters unforeseen circumstances
The statute of limitation is tolled when the creditor encounters certain issues that prevent him or her from collecting the debts. In most of these cases, the statute of limitation can begin and then it will toll due to these circumstances. It will begin again when the circumstance is sorted out. For instance, when the person who can sue you is imprisoned, away at war, or incarcerated.
Reviving the Statute of Limitations
Since you are likely to make periodic payments on your credit card, you should be cautious not to reset the statute of limitation unintentionally. The instance under which the statute of limitation is this. When you stop making payments for a long time, the statute of limitation will begin. If you make payments along the line, the statute of limitation will reset to zero. There is an exception to this rule. If the credit card company or creditor closes your account and you make a payment, the statute of limitation does not reset. The statute of limitation only resets on accounts that are still active.
Waiving of the Statute of Limitation
It is not possible to verbally waive the statute of limitation but you are likely to waive it if you sign some agreements. Some contracts state that you will waive the statute of limitation. When you sign the agreement, you have agreed to waive it. Due to this, it is important to carefully read the agreement before you sign.
The creditor may also ask you to sign an extension in the statute of limitation. This extends the period in which you can be sued for your debts. This waiver can only work if you sign the document. The maximum length time for which an extension can be affected is 4 years.
The creditor may also ask you to sign a documents promising that you will pay the debt. They can only ask you to sign the new document when the statute of limitation expires. In this case, you can decide not to sign it since you are not obligated to sign it. However, once you sign it, you will be bonded by the contract and you will be obligated to pay the debt. The statute of limitation will only start running again after you miss a payment under the new contract.
Why the Statute of Limitation Matters?
The statute of limitation gives the creditor a period which they can force the debtor to pay the debt. They will need judgment from the court before forcing you to pay the debt. They will first sue you and when the court agrees that they can collect the debt since the debtor really owes the said amount, they can collect the debt. They will need to submit the judgment to an employer or bank before money is released on the account of the debtor. Once the creditor or the debt collection company has the judgment, he or she can garnish the wages of the debtor. In most cases, the debt collector will submit the judgment to the employer who will then release the debtor’s salary as payment for the debt. They could take some part of the salary for an extended period and this needs to comply with the California wage garnishment law.
They can also take cash from your account as payment for the debt. This is popularly called levying against your account. With this, the creditor or debt collector will need to submit the judgment to your bank to begin the process.
If the creditor is unable to sue the debtor until the statute of limitations expires, he or she loses the right to get a judgment against you or force you to pay the debt.
Things the Debt Collector Keeps from You
- The debt collector must stop calling you at work if you tell them to. Many people do not know this but it is clear in the Fair Debt Collection Practices Act that when your employer is not comfortable with debt collectors contacting you while at work; you must inform the debt collector about it. The debt collector must also stop contacting you at work after that.
- The debt collectors cannot explain your situation to other people. It is illegal for other people to know about your debt through them.
- Your credit will not improve right after you pay off your collections. Contrary to what creditors tell you, your collections will stay on your credit report for seven and a half years. The debt collector will tell you that when you pay your account in full, they will update your report but note that it takes seven and a half years for the collection to be taken off your report.
- You do not need to pay the debt of a deceased relative. The debt collector may not share that information with you but you should know. The instance where you will be required to pay the debt is when you are a cosigner and in some cases, if it is your spouse. The debt collector can also collect the debt if the person left an estate.