In New York, creditors have the right to sue debtors to recover funds for up to six years after they have defaulted, or failed to pay a credit-card bill. Failure to make payment arrangements or otherwise resolve the debt can lead to negative entries on the debtor's credit report, wage garnishment, or the freezing of his bank account.
Statute of Limitations
New York state law sets six years as the statute of limitations for credit-card debt. This means that a credit-card company has six years from the time a consumer goes into default to take legal action and attempt to recover its money. If the debt is more than six years old, the company cannot use the court system to try to recover the unpaid funds. However, creditors can still hire private collections agencies to attempt to resolve the debt.
Allowable Remedies
If a credit-card customer is in default, the creditor may obtain a judgment against him by going to court. Once the judge agrees that the customer owes the creditor money and orders him to pay it, the creditor may ask the court to order a wage garnishment or a freeze on the debtor's bank account.
Wage Garnishment Law
If a creditor obtains a garnishment order in New York, he may garnish up to 10 percent of the garnishee's weekly wages or 25 percent of the garnishee's weekly disposable income (wages minus required payments such as rent and utilities). The maximum amount the creditor may garnish is $217.50 per week as of 2010.
Exemptions
A creditor may get a court order to freeze a bank account, thus preventing the debtor from accessing or using money in the account. This is allowed if the debtor is unemployed and owes money to the credit-card company. As of 2010, creditors cannot freeze bank accounts that hold less than $2,500 if the money in the accounts came from exempt sources such as Social Security or disability payments. If the account has less than $1,740, the creditor cannot freeze the account regardless of the debtor's source of income.
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