Archive for July, 2012

Financial Columnist’s Advice on Old Credit Card Debt May Mislead Money Talk Readers

Monday, July 16th, 2012

Q & A Posted on LA Times Money Talk Section on July 15, 2012: Link to Money Talk

My response:
This question concerns a credit card debt that was charged off in 2007. That means that it has not been paid since 2006 or 2007, because banks usually charge off accounts 180 days or earlier, after not receiving any payment.

I agree with the columnist, Liz Weston, that contacting the bank that issued the credit card would not be productive.  Within one year of default and lack of payment, banks almost universally sell the credit card account to a debt buyer or sue in their own name.

However, this debt has not been paid for more than four years, making it almost certain that the debt is well beyond the statute of limitations, thus discharged under California law.  See my blog on the Don’t Pay a Dime Strategy, using California law at this DPAD Link.

Ms. Weston’s response should have explained that the debt is most likely discharged, because the statute of limitations had long since expired, so that the consumer has the upper hand on this and should not offer to pay much at all and should be clear in his or her communications that this debt is discharged by the already-expired limitations period.

My concern is that the consumer may contact the debt collector and offer in writing to pay the debt. Some debt collectors may potentially try to use this written offer or actual payment to claim that the consumer has revived the statute of limitations period on the unpaid balance, giving them another four years to file a debt collection lawsuit. I disagree with that possible position.

Some debt collectors incorrectly believe that they can report any payment received as “last activity” on the consumer’s credit, thus renewing the 7.5 year period for credit reporting.  I disagree with that possible position.

Thus, I hope that the LA Times removes this posting, so its readers would not be mislead.

Robert Stempler
Twitter @RStempler

Can they put me in jail for an unpaid judgment? Is bankruptcy the only option?

Thursday, July 12th, 2012

I wonder what can happen, if I cannot pay my court-ordered judgment from a credit card debt that I stopped paying?  Can they put me in jail or must I file for bankruptcy?

My response:
There are various options available to the judgment creditor and their lawyers, but jail is not one of them, provided that if you are ordered to appear in court to answer questions, you appear in court and answer the questions truthfully. Also, if the order to appear requires that you bring documents, you bring those documents to the hearing.

The methods that the debt collection agency’s collection lawyers can apply to enforce the default judgment against the debtor are: (a) wage garnishment, (b) levy funds on deposit in a bank account or investment account, (c) record in the county a lien against the debtor’s real property, (d) place a lien against any non-exempt personal property, (e) have the court order other sale of assets or assignment of title to assets, (f) order of the court for the debtor to appear for examination regarding his or her finances, to find other assets and income, (g) get an order to have any company or persons which owes money to the debtor to instead pay the judgment creditor.  Perhaps there are other creative ways to enforce an unpaid judgment that the debt collection attorney has, but jail is not one of them.

My law office’s web site’s home page (linked below) has several short videos. I suggest watching the first video, which explores options when sued, several of which still apply, after a judgment has been entered.  Also, if this was a default judgment, then you may be permitted to set aside the default judgment, if you were not properly served or the default judgment was entered within a certain period of time. Please search my blog postings for more on default judgments.

Robert Stempler
Twitter @RStempler

Options following Entry of A Default Judgment by Credit Card Bank

Friday, July 6th, 2012

I was sued by Capital One on an outstanding credit card debt.  The debt collection attorney filed a request to enter default judgment for $7000. The Court granted a judgment and I believe that they are now trying to get into our bank account.  What are my options at this stage of the case?  We have no real estate or assets, except for Social Security.  What happens to this on our credit report if we don’t file bankruptcy and are unable to pay it?

My Response:
The picture that you have painted, so far, is someone whom experienced lawyers would likely term “judgment proof,” with sufficiently low income to qualify for a Chapter 7 Bankruptcy.

Following entry of this default judgment, here are your options:
a. Promptly file motion to set aside the default judgment within the proper time limits, to be able to defend the court case on its merits. The Courts insist that the defendant file this motion soon after learning of the default judgment, if they had not been served or had actual notice.
b. May a large payment or several payments towards the default judgment, until they file a satisfaction of judgment. Borrow the settlement funds, if needed. You may should have an understanding in writing of how much in settlement payments or a fixed sum this would be, or you may end with a misunderstanding of how much it will cost to satisfy this judgment in full.
c. Do nothing, which would let them to try enforcing their judgment against whatever they can find to lien, that is not exempt, though it does appear to me that your bank account is exempt if it is only from Social Security benefit deposits.
d. File bankruptcy.  If you qualify for a Chapter 7, then this and your other unsecured debts would be discharged.  If you don’t qualify for a Chapter 7 for whatever reasons, then you could file a Chapter 13 Repayment Plan Petition and make payments through the trustee and pay it off over several years, interest free.

The benefits of resolving this judgment soon are that you don’t want this $7000 judgment sitting out there gaining (accruing) interest at the rate of 10% per year, which is $700 every year in your case, plus possible other costs and attorney’s fees, as applicable to the judgment.

Also, if they enforce this judgment by levying your bank account, it can be very embarrassing to have your checks bounce and to go to the store with a debt card that is refused, if they enforce a levy and the bank accepts it.  You may be entitled to all your money back, by filing a claim of exemption, but having bounced checks is considerably damaging to your reputation. Plus, and unpaid judgment can be appear on your personal credit reports until paid.

Robert Stempler
Twitter @RStempler