John Roska: Credit card debt has statute of limitation
Q: I've paid a closed credit card account for several years, but I still owe over $1,000. I'm 70 years old, on a fixed income and don't own any real estate, so I don't see how I'll ever pay this off. What can I do? Should I declare bankruptcy? Will the statue of limitation run out at some point?
A: If you don't repay them in full, not much bad can happen. They could sue, and maybe get a judgment against you, but they probably can't make you pay anything.
The statute of limitation on a credit card debt is five years. That's the limit on unwritten contracts. Surprisingly, credit card debt is considered to be a series of unwritten agreements to pay, which you make each time you use your card.
That five years starts running from when you "default" on those unwritten agreements to pay. Usually, that's the date of your last payment. If you're sued more than more than five years after your last payment, the statute of limitations expired. Raising that defense to the lawsuit should get it dismissed.
But you've been paying regularly. You'd have to stop paying, and they'd have to wait five years before suing you, for you to have that defense.
If you did stop paying, the credit card company would either bug you directly for payment or hire a collection agency to bug you.
If you resisted those requests to pay voluntarily, you could eventually be sued. But someone can sue you, and "win," and never collect a dime.
That's because getting a judgment against you — what many consider to be "winning" the court case — just settles how much you owe. It's not a payment order.
As this column frequently explains, you can't get blood out of a turnip. And unless you have income from a job, and more than $4,000 in the bank, you're probably a turnip. All your unearned income, and probably everything else you own, is legally "exempt" from collection. Even a judge can't make you pay anything.
You can't go to jail for owing money and being unable to pay. If you're exempt, you're legally unable to pay.
You could file for bankruptcy, and discharge this and all your other debts. But it'd be a waste of a good bankruptcy. Creditors can't take money from you now, so going bankrupt won't improve on that. It might stop the hassle of dealing with creditors and collectors, but it won't do a whole lot more than exemption law already does to stop creditors from taking money from you.
So, between paying and not paying, is there anything you can do in between? One possibility is saving up a lump sum, to make a settlement offer with. There's no guarantee the creditor will take it, but there's no harm in trying. Creditors often settle for about half of what you owe — sometimes less.
If they agree to take a reduced payoff, insist they confirm in writing and before you pay that they'll accept your lump sum as payment in full, and release you from liability.
John Roska is a lawyer with Land of Lincoln Legal Assistance Foundation. You can send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820. Questions may be edited for space.