In Georgia, the statute of limitations for filing a lawsuit to collect credit card debt is 6 years. This means that if your account is inactive for six years, you have a winning defense to any credit card collection lawsuit.
The clock on this statute of limitations begins to run when you last use the card or when you last make a payment. There is some authority to suggest that the creditor can restart the statute of limitations clock if you acknowledge that you owe the debt, enter a payment plan, or accept a settlement offer.
If you get a collection call or letter from a creditor or collection agency on a credit card debt that has been dormant for almost 6 years, it would not be wise for you to accept the call or say anything to the caller. Instead you should contact a lawyer to speak on your behalf.
The expiration of the 6 year statute of limitation does not mean that the debt has expired – it simply means that if the creditor/collection agent files suit, you can (and should) raise a statute of limitations defense and the lawsuit will be dismissed. Creditors can continue to call you to demand payment. If you choose to speak with the collection agents (which I do not recommend) you only need say the following:
The statute of limitations has run on this debt and I am under no obligation to pay this debt. If you contend that you do have the right to sue me for this stale debt, please put that assertion into writing and mail it to me. Otherwise I am hereby asserting my rights under the Fair Debt Collection Practices Act – you may no longer contact me for collection of this debt.
You do not have to verify your mailing address or say anything else. Just hang up.
Creditors and collection agencies sometimes file suits against consumers even after the 6 year statute of limitations has passed. If the consumer does not respond to the lawsuit, or does not raise the statute of limitations defense, the collector may obtain a valid judgment which can be used to garnish wages, seize bank accounts or lien real estate.
Collection agencies, debt buyers and collection lawyers who file suit on stale debt take a risk, however. If the defendant consumer hires a knowledgeable attorney, the attorney can get the lawsuit dismissed and can pursue damages against the collector plaintiff for violating one or more consumer protection statutes.
If a client of mine is receiving collection phone calls for credit card debt that is older than 6 years, I will call the collection agent and ask him if he is contending that the debt at issue is subject to legal action. If the collection agent lies, we would have a lawsuit for damages under the Fair Debt Collection Practices Act and other federal laws. Most of the time the agent will acknowledge that his company cannot sue successfully but will reference my client’s credit reports.
I also send the bill collector a “drop dead” letter – which is a written notice to the creditor to stop communicating with my client, with a penalty of damages if the collection agency does not stop. Unfortunately stale debt is bought and sold all the time, meaning that the drop dead letter I send to collection agency #1 will not bind collection agency #2.
Delinquent or unpaid debt can remain on your credit report for up to 7 years, then it has to come off. As far as any demand for payment on “moral grounds,” I tell the collection agent to jump in a lake.
Credit card companies and collection agencies buy and sell stale debt all the time. In the bankruptcy business we call this debt “zombie debt” and it is big business – generating over $1 billion in revenue. If you get the sense that the bill collection world has a lot of the “wild west” still in it, you would be correct. As a rule, I think that nothing good at all can happen if you speak directly to a bill collector or collection agent. Instead, let me do the talking.
The bottom line here is this: if you owe money to credit card companies, there is very little good that can come out of conversations between you and the bill collector. Even if bankruptcy seems like a remote option, it makes sense to talk to a bankruptcy lawyer to better understand your rights and responsibilities.
In my next blog post, I will discuss civil judgments issued by Georgia courts and their “dormancy periods” which are not at all the same thing as a statute of limitation.