What Is the Law on Credit Card Default?

In the first three months of 2010, credit card default rates stood at 9.14 percent -- the highest rate since records began being kept, according to a 2010 article in "The New York Times." Those having difficulty keeping up with credit card payments may be understandably worried about what default entails. Getting answers on what the law is on credit card default may help you sleep a little better at night.

Judgments

When you can't pay your credit card bills, one option that your creditor has is taking you to civil court. The court may issue a judgment against you requiring you to pay your bills. Credit card companies generally avoid this route, as it is expensive and troublesome. However, it is hard to stop the process once it has begun and in some states it is impossible. Judgments may last as long as 10 years and can be difficult to avoid.

Consequences of a Judgment

A number of consequences flow from getting a credit card judgment issued. Once you have a judgment issued, your credit card company can take you back to court and get an order requiring you to pay. Methods designed to force you to pay include freezing your bank account, putting a lien on your property or garnishing your wages. The latter means that a portion of your paycheck will be taken out every time you are paid until you have settled your debt.

Statute of Limitations

Laws vary from one state to another, but every state has a statute of limitations for credit card debt, known as "open accounts" in legal parlance. This means that there is a time limit on how long your creditor has to use the courts to collect debt. Creditors may still take you to court for old debt, however you may use the age of the debt as an affirmative defense.

Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act is a federal law dictating what methods collection agencies can use to collect defaulted credit card debt. Harassment and abuse are explicitly forbidden by the law. This includes threats of violence, the use of obscene language, publishing your name and repeatedly calling you in a harassing manner. The creditor cannot use false or misleading statements in an attempt to get you to pay up. If a creditor uses any illegal methods to attempt to claim its debt, you may be eligible for monetary compensation in civil court.