Credit Card Judgment Statute of Limitations

The National Foundation for Credit Counselings 2009 Financial Literacy Survey determined that 26 percent of Americans fail to pay their bills on time. Should a credit card company or debt collector file a civil lawsuit against an individual for failing to pay his credit card bills, a judgment is often the result.

Significance

Credit card judgments occur when a debtor either ignores the court summons regarding her unpaid credit card debt or defends herself unsuccessfully against the creditors allegations. A judgment is a formal court ruling that grants the creditor additional collection options. Although consumer protection laws vary by state, judgment creditors often have the right to garnish a debtors pay, place liens against her property or seize her bank accounts.

Time Frame

Judgments are not valid indefinitely. Each states law dictates how long a judgment creditor can use its judgment as a collection tool. Once the judgment expires, the creditor can still attempt to collect the debt, but may not collect the debt involuntary through garnishment or liens. During the judgment enforcement period, interest can continue to collect on the original debt.

Misconceptions

Some consumers confuse the statute of limitations for judgment enforcement with the statute of limitations for debt collection. The statute of limitations for debt collection refers to the period of time during which a creditor may file a lawsuit against a debtor. The statute of limitations for judgment enforcement is the period of time during which a creditor may attempt to enforce a successful lawsuit. Because the statute of limitations for debt collection is often shorter than the statute of limitations for judgment enforcement, few creditors can sue consumers again for an unpaid credit card account after the original judgment expires.

Considerations

The length of time a given state permits a creditor to enforce its judgment can also affect the amount of time that the judgment itself appears on the debtors credit report. While the Fair Credit Reporting Act restricts most negative credit report entries to a seven year reporting period, it stipulates that, if the individuals state statute of limitations for judgment enforcement exceeds seven years, the credit bureaus can allow the judgment to remain in the individuals credit reports for the length of time that the debtors state allows it to be enforced.

Warning

Many states allow credit card companies or collection agencies to renew a credit card judgment that is approaching expiration should the creditor do so within a pre-set time period prior to expiration. For example, in California, judgments expire after 10 years. A creditor can renew a judgment a total of three times giving it a total of 30 years to legally force the debtor to pay. Should a credit card company or collection agency need to renew its judgment, any interest the original judgment accrued will be added to the principal amount owed when the court processes the judgment renewal.