Credit-Card Debt and Debtor's Rights

June 22, 2012 (Press-News.org) For big-ticket purchases or shopping on the Internet -- and even smaller purchases made on quick runs to the store or filling up the gas tank -- credit cards are convenient. Carrying cash to make these purchases is often not feasible. Along with the convenience, there are other benefits of using credit cards, such as the ability to pay off purchases over time or receiving rewards for using the card (like airline miles or cash back).

Yet, the same convenience and benefits offered by credit cards can also be the things that get consumers in financial trouble.

Credit-Card Debt Collection

Like all creditors, credit card companies who do not receive payment for debts can, within the bounds of the law, seek to collect on the debt. Collection can take the form of sending letters or calling the debtor. If the debt is not collected through these measures, the credit card company can file a lawsuit asking the court to compel the debtor to pay back the debt, including through wage garnishment.

Credit card companies, however, do not have an unlimited amount of time to file a lawsuit and are bound by each state's statute of limitations on credit-card debt. In Arizona, a creditor has six years to file a lawsuit to collect on credit-card debt.

After the statute of limitations has run, the credit card debt is considered to be "time barred." If a lawsuit for nonpayment of a time-barred debt is filed, the lawsuit can be dismissed. But the burden to prove the credit-card debt is time barred may be on the debtor.

It is important to note, though, that just because a debt becomes time barred, that does not mean that the creditor must stop attempts to collect the debt. Time barred only means that a lawsuit cannot be filed in an attempt to collect on the debt -- it does not prohibit phone calls and letters.

Consumer Rights

Throughout the process of collecting on credit-card debt, the law expects creditors to act in a respectful manner and not harass debtors. The Fair Debt Collection Practices Act, or FDCPA, regulates how collectors can seek payments on debts.

In general, the FDCPA "prohibits debt collectors from using abusive, unfair, or deceptive practices to collect" on debts. Specifically, the Federal Trade Commission, the government agency that enforces the FDCPA, states that debt collectors are forbidden from:
- Making false statements -- Debt collectors cannot claim that a debtor has committed a crime; claim to be attorneys, if they are not; or misstate or misrepresent the actual amount of the debt.
- Harassing debtors -- Debt collectors cannot threaten debtors with violence; use obscene, profane or vulgar language; or embarrass debtors by publishing their names and the amounts owed.
- Making certain claims -- Debt collectors cannot tell debtors they will be arrested for not paying the debt; threaten legal action if none will be taken or if the debt is time barred; or threaten legal remedies such as garnishment or seizure unless these remedies are available.

Additionally, there are restrictions on how and when debt collectors can contact debtors. For instance, debt collectors cannot call before 8 a.m. or after 9 p.m., or contact debtors at work if told that the debtor cannot receive calls there.

FDCPA Violations

If a debt collector violates the provisions of the FDCPA, debtors can file a lawsuit in federal court. Through a lawsuit, debtors may be entitled to receive damages suffered, up to $1,000 from the debt collector, and attorney's fees and court costs.

Stopping Collection Calls

One sure way to stop credit-card debt collection calls is to file for bankruptcy. Filing for bankruptcy will "stay" all collection efforts, ending the phone calls and letters from debt collectors. Typically, there are two types of bankruptcy that most debtors can file for: Chapter 7 (liquidation) and Chapter 13 (wage earner's) bankruptcy.

Bankruptcy does not offer a one-size-fits-all relief option for all financial situations. Understanding your source of income, if any, what types of debts you have, and what type of property you own (like a house and car) will help determine if filing for bankruptcy or another form of debt relief is appropriate for your situation.

If you are struggling with credit-card debt or are being harassed by creditors, speak with an experienced bankruptcy attorney to learn more about all your debt relief options.

Article provided by Charles M. Sabo, P.C.
Visit us at www.charlessabo.com/