Statute of Limitations (SOL) on Debt by State

The statute of limitations (SOL) is the time limit for the creditor or debt buyer to file a lawsuit against the debtor. This period starts when the debtor makes the last payment or becomes delinquent. Even though the SOL has “run” (expired) on a debt will not prevent a lawsuit from being filed (via a Summons And Complaint), but the you can have the suit dismissed on this basis. It is imperative that you answer any lawsuit filed against you. If you need assistance in answering a debt buyer or creditor lawsuit then contact our law firm here.

The Statute Of Limitations only covers lawsuits, and SOL expiration does not affect other types of collection action or reporting of the account to credit bureaus. The creditor or collection agency may continue with letters and telephone calls forever until you write them a cease and desist letter. However, they will generally put much less effort into collecting “Out-Of-Statute” debts, and may give up easily. Out-Of-Statute debts can still be reported to credit bureaus for the time limits specified in the Fair Credit Reporting Act which is right now 7 years plus 6 months for many debts.

Judgments have a separate Statute Of Limitations, which you can find here.

The information above is believed to be accurate
at the time of the creation of this page, and is for reference
only. Nothing here should be construed as or relied upon as legal advice. If you are concerned
about possible lawsuits, you may wish to confirm this with your
state’s Civil Code and/or a qualified Credit Repair Attorney. If you find any discrepancies or errors here, please let us know at: c@henleycreditlaw.com.

What to do when served a lawsuit in Texas

Hudson Henley, a Texas and California attorney, has recorded this video of what to do when you have been served a law suit. If you have any questions, you can contact his office here.

What to do when served a lawsuit

New Consumer Protections Start Today

Credit card holders have more rights:

• More time to pay. Credit card companies have to mail bills 21 days in advance of the billing date.
• More time to reject changes. Card holders now have up to 45 days to reject rate increases.
• More time to pay off existing balances. Card holders now have the option of paying off existing balances at current rates over a time period of at least 5 years.
• More definite deadlines on payment. Credit card companies can no longer have weekend deadlines for payments, cannot change the due date every month, or use deadlines that fall in the middle of the day.
• Excess payments go to the highest interest balance first. Credit card companies are now required to apply excess payments to the highest interest balance first.
• Customer notification and permission on going over your limit. Credit card companies must notify and receive customer permission to process any transaction that places the account over its limit.

FACT SHEET: REFORMS TO PROTECT AMERICAN CREDIT CARD HOLDERS | White House Press Office

How much can be garnish from my paycheck?

Federal law limits wage garnishment to 25% of the weekly disposable earnings OR to the amount that is over 30 times the Federal Minimum hourly wage. It is based on the lower of the two numbers.  You can find the full text of the act on the FDIC website at 15 USCS Section 1673.

As of August 3, 2009, the first $217.50 is exempt.  If the federal minimum hourly wage changes, then this number will change too.

There are exceptions.  The limit does not apply to:

1. court or administrative ordered support;
2. Chapter 13 Bankruptcy wage deduction payments;
3. federal or state tax collection.

The exception for child support allows wage garnishment ranging from  50% to 65% of the disposable earnings, depending on whether the wage earner is supporting a non-garnishing spouse or dependant child, and whether the support order covers a time period that predates twelve weeks before the beginning of the work week pay period.

Some states such as Texas do not allow debt collectors to garnish your paycheck. They can however attempt to garnish your bank account.

IRS Regulations Concerning Cancellation of Debts / 1099-C

Many consumers receive a 1099-C from a creditor when they settle a debt or they have received a 1099-C from a debt collector without paying off the debt.

What is a 1099-C?

It is a form filed by the creditor telling the IRS that the debtor has canceled over $600.00 in debt obligation. The IRS views this “canceled” debt as income unless (a) there is a bona fide dispute concerning the debtor’s obligation to pay, (b) the debtor is insolvent, (c) the debt is discharged in bankruptcy. (See 26 U.S.C. §6050P; 26 C.F.R. §1.6050P)

Common Issues with the 1099-C

Many of the creditors falsely report how much is owed to the IRS. They can only report the principal amount as “canceled” debt. They can not include interest and penalties. (See Debt Buyers’ Ass’n v. Snow, 06-101, 2006 U.S.Dist. LEXIS 6527 (D.D.C., Jan. 30, 2006)) Most debt collectors buy information about a debt off a disk without knowing the true nature of the debt. The amount of debt a collector is collecting usually includes principal + interest + penalties + collection fees. Most of the time there is no way of knowing what the principal amount written off was.

Other requirements of the IRS code are that generally, a debt is not canceled if (a) collection activity has occurred within 36 months (b) the debt is packaged for sale.

What should a consumer do when a they receive a 1099-C?

First, they will need to evaluate the amount of debt being “canceled.” If the “canceled” amount: a) does not reflect close to what the credit card limit was b) if they have a bona fide dispute with the debt OR c) have discharged the debt in bankruptcy then they will want to file a claim with the IRS. To file a claim you will want to fill out and mail form 3949-A

Second, if the consumer is insolvent, (meaning they have more liabilities than assets) then they need to explain that to the IRS on your tax return. You can fill out IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness and attach a detailed letter to your tax return explaining the calculation of your total debts and assets. Your liability or lack thereof depends on your equity in assets.

Failure to address this via the 982 may result in an IRS “under-reporter” assessment. They will tax you on the 1099C if you leave it off the return when all tax documents reported to them are matched against the data on your return.

IRS Instructions for 1099-C

IRS Code for the 1099-C

26 U.S.C. §6050P; 26 C.F.R. §1.6050P says:

(a)(1) Before discharging a delinquent debt, also referred to as close out of the debt, the Secretary shall take all appropriate steps to collect the debt in accordance with 31 U.S.C. 3711(g)(9), and parts 30 through 33 of this chapter, including, as applicable, administrative offset; tax refund offset; Federal salary offset; credit bureau reporting; administrative wage garnishment; litigation; foreclosure; and referral to Treasury, Treasury-designated debt collection centers, or private collection contractors.

(2) Discharge of indebtedness is distinct from termination or suspension of collection activity under this subpart, and is governed by the Internal Revenue Code. When collection action on a debt is suspended or terminated, the debt remains delinquent and further collection action may be pursued at a later date in accordance with the standards set forth in this part and 31 CFR parts 900 through 904.

(3) When the Department discharges a debt in full or in part, further collection action is prohibited. Therefore, before discharging a debt, the Secretary must:

   (i) Make the determination that collection action is no longer warranted; and

   (ii) Terminate debt collection action.

(b) In accordance with 31 U.S.C. 3711(i), the Secretary shall use competitive procedures to sell a delinquent debt upon termination of collection action if the Secretary of the Treasury determines such a sale is in the best interests of the United States. Since the discharge of a debt precludes any further collection action, including the sale of a delinquent debt, the Secretary may not discharge a debt until the requirements of 31 U.S.C. 3711(i) have been meet.

(c) Upon discharge of an indebtedness, the Secretary must report the discharge to the IRS in accordance with the requirements of 26 U.S.C. 6050P and 26 CFR 1.6050P–1. The Secretary may request that Treasury or Treasury-designated debt collection centers file such a discharge report to the IRS on the Department’s behalf.

(d) When discharging a debt, the Secretary must request that litigation counsel release any liens of record securing the debt.

Am I responsible for my deceased relative’s debts?

When a loved one passes the last thing most people think about are that person’s debts left behind. Often debt collectors contact that persons relatives to see if they would pay for the debt. They often use language to excite your emotional state.

You should always seek the advice of a probate attorney or family attorney as to who legally owes what after a loved ones death. Generally, except for the spouse, no one else may be responsible for the deceased’s debts. Their estate is responsible for paying the remainder of their debts.

According to the FTC:

Here’s what the Fair Debt Collection Practices Act (FDCPA) has to say about who has responsibility for a dead relative’s debts.

• Who is responsible for paying the debts of a relative who has died?
  Generally, someone’s estate is responsible for paying their debts. But if there isn’t enough in the estate to cover the debts, they typically go unpaid.

• Am I legally obligated to pay the debts of a deceased relative?
  You usually don’t have a legal obligation to pay the debts of a deceased relative who was not your spouse. Even a spouse’s obligation to pay may be limited under state probate law. To determine whether you’re legally obligated to pay, talk to an attorney who is knowledgeable about this area of the law.

• What should I do if a debt collector contacts me about a debt of a relative who has died?
  Give the debt collector the contact information of the decedent’s personal representative. That’s the person responsible for settling their affairs, including paying any outstanding debts from the estate. If there is a will, the personal representative is known as the executor; if there is no will, the personal representative is known as the administrator.Don’t give any of your personal information, like your Social Security number, birth date, or financial account numbers to anyone unless you know who you’re dealing with. Some con artists may check obituaries and other legal notices, and then contact relatives of a deceased posing as debt collectors. These scam artists can use your personal information to help them commit identity theft or other types of fraud.

• Do I have to speak with a debt collector who contacts me about the debts of a deceased relative?
  No. But if you’re a decedent’s personal representative, or otherwise legally obligated to pay the debt, you may want to talk with the debt collector to see if you can resolve the matter.

• Can I stop a debt collector from contacting me about the debts of a deceased relative?
  Yes. If you decide that you don’t want a debt collector to contact you again, write a letter to the collector saying so. Then, make a copy of your letter, send the original by certified mail, and pay for a “return receipt” so you will be able to document what the collector received and when. Once the collector receives your letter, they may not contact you again, with two exceptions: a collector can contact you to tell you there will be no further contact and to let you know that they or the creditor plan to take a specific action, like filing a lawsuit. Remember that even though the collector is prohibited from contacting you again, they still may sue the estate of your relative or the legally responsible person to collect the debt.

Can debt collectors tell anyone else about my dead relative’s debt?
Other than to get the personal representative’s location, a debt collector generally is not allowed to disclose your relative’s debt to anyone other than the deceased’s spouse, parent (if your relative is a minor child), or guardian.

California AB350 Bill to Regulate Debt Settlement Firms

If enacted, California AB350 would not be effective until 2012. Consumer groups are already lining up to oppose the bill. They contend it is too soft of debt settlement companies. The debt settlement industry says that if the consumer groups had their way they could not stay in business profitably.

I think that there is a way for debt settlement companies to operate profitably and provide consumer protections. But until it is found, I think that most people should seek legal representation for Debt Settlement.

Read the full article here.