The statute of limitations creates a deadline for a lawsuit to be filed in court. The reasoning is twofold: (1) people should be free to shred or destroy documents after a defined period of time without fear they will be taken to court and (2) witnesses forget events and details as time passes. Once the deadline passes, any lawsuit filed can be dismissed by the court and in some cases the party that initiated the lawsuit can be fined. The law creates deadlines for the filing of most civil and criminal actions. The deadline for non-governmental debt collection (credit cards, collection agencies, payday loans, medical bills and more) in California is four years. That means if you have not made a payment on a credit card or collection account in more than four years, the claim is unenforceable in court. Once a claim becomes unenforceable in court the creditor will not be able to garnish wages, take money from your bank account, or put a lien on your house. If a creditor does file a lawsuit prior to the expiration of the statute of limitations, then you’ll need to take prompt action. Failure to respond to a lawsuit will almost certainly result in a judgment against you. A judgment creditor has many options and can pursue one or more of them simultaneously. A judgment creditor can garnish wages and/or levy a bank account and/or put a lien on your house and/or summon you to court to discuss your assets. Worse yet, a judgment will be enforceable for 10 years and can be renewed for an additional 10 years. Credit reporting is a different but related issue.
Credit reporting has a different set of rules. Most derogatory marks appear on a credit report for 7 years but many debts become unenforceable after 4 years if no payments were made. This means a credit report is a helpful tool but it does not accurately reflect enforceable debts against you. I commonly see people with a credit report showing numerous unpaid debts who assume they need a bankruptcy; my first question is, “When was the last time you made a payment on these debts?” Bankruptcy voids most debts but is generally unnecessary if the debt is unenforceable as a result of the statute of limitations.
At the Law Office of Michael Primus we have helped thousands of clients get out of debt, stop wage garnishments, and start fresh through bankruptcy. If you live in Contra Costa, Alameda or Solano counties and have debt problems, contact us for a free in-office consultation. We have offices in Walnut Creek, Antioch, and Hercules.
References: California Code of Civil Procedure §337, California Civil Code §1788.56 and the Fair Credit Reporting Act 15 U.S.C. 1681