Understanding the statute of limitations on debt in California
Dealing with debt collection can be a daunting task, but there's a silver lining: not all debts are eternal. In California, as in many other states, there's a “statute of limitations,” or time limit, on debt collection.
In this article, you’ll find answers to the most common questions about California’s statute of limitations on debt. You will gain a clear understanding of your rights, responsibilities, and what to expect.
FAQ about the statute of limitations on debt in California
Trying to make sense of laws and finance can often feel like trying to read instructions in a foreign language. It can be tricky figuring out what applies to you, and how.
Following is a straightforward “translation” of the most important and frequently asked questions about the California statute of limitations on debt.
How long before a debt is uncollectible in California?
The statute of limitations on most debt in California, including credit card, medical, student loan, and auto loans is typically four years, as stated in the state’s GOV link.
This period begins from your last payment date or when you first defaulted on the debt.
Debts other than those just mentioned have different time limits.
Mortgage and personal loan debts have a six-year limit, and creditors have 10 years to collect on a judgment against you.
For federal student loans and child support there is no limit.
Judgment liens on property can last 10 years, and state tax agents can collect owed balances for up to 20 years.
Is there an expiration date for debt collection?
Although the statute of limitations in California for debt collection can limit legal action, it doesn't eliminate the debt.
Creditors may still contact you to pay. But if the statute of limitations has run out, they can't take you to court.
Keep in mind that even debts that have passed the statute of limitations can still appear on your credit report, typically for seven years from the date of delinquency.
What happens in California after 7 years of not paying a debt?
The general rule is that credit reports must be deleted after seven years.
In California, there's a three-year period when the debt is no longer legally collectible, but the delinquent account can still appear on your credit report.
This can pressure some consumers to pay the debt even though they can no longer be sued for it, especially if the outstanding account is keeping them from securing credit or being approved for an apartment rental.
What is the new debt collection law in California?
As of January 1, 2022, debt collectors engaged in business in California must obtain a license to continue operating in the state. The Nationwide Licensing System website began making the application available September 1, 2021.
Know your rights and responsibilities in California's debt collection process
As overwhelming as the laws and statutes can be, understanding them is empowering and can positively impact your finances and, therefore, your life.
Here are a couple of things to consider.
Avoid hitting the reset button: actions that restart the debt clock
Certain actions can reset the statute of limitations. Think of that legal time limit within which your creditors can sue you as a countdown clock.
It ticks down steadily unless you do certain things that can restart it from zero.
For example:
- Making a payment: Even a small amount can extend the legal collection period because it's seen as an acknowledgment of the debt
- Agreeing to a repayment plan: Establishing a repayment plan is akin to creating a new agreement, initiating a fresh statute of limitations period.
- Accepting a settlement offer: If you accept a settlement and agree to pay a portion of the original debt, it's considered an acknowledgment of the debt and resets the statute of limitations.
- Making a new charge on the account: Adding a new charge to the account is viewed as new activity, which can prolong the time during which creditors can sue you.
Answering a debt collection lawsuit: time is of the essence
Whatever you do, don’t ignore that angry letter about your debt—dealing with it head-on will make your life easier in the long run.
In California, depending on how the summons was served, you have either 30 or 40 days to respond to a debt complaint. This countdown starts the moment you receive the summons.
If you fail to respond within this timeframe, the court can automatically pass a default judgment against you. This is like forfeiting a race before it's even begun.
A default judgment can have serious consequences, including wage garnishment, bank levies, and liens on your property. So, it's crucial to act promptly.
Seek legal advice if needed, and ensure you respond to the lawsuit within the stipulated time.
Help in navigating the intricacies of debt collection practices
You don’t have to figure this all out on your own. The Federal Debt Collection Practices Act (FDCPA) serves as a guide and provides protection against unfair practices and ensures certain rights.
Under the FDCPA, debt collectors are prohibited from harassing or abusing you. They cannot use threatening or offensive language, make false threats of harm, or engage in repeated calls to annoy or harass you.
In addition, debt collectors must adhere to call restrictions. They cannot call you at unusual or inconvenient times, typically limiting calls to between 8 a.m. and 9 p.m.
However, if those hours are inconvenient for you, you have the right to request different calling times.
Debt collectors must also respect your privacy and cannot include embarrassing information about your debt on the outside of their correspondence envelopes.
Disputing a debt: protecting your financial integrity
When dealing with a debt that you believe is incorrect, taking action is critical. Here's what you need to know:
- Respond promptly in writing to dispute the debt, especially if it is inaccurate or if you require more information.
- Within five days of initial contact, the debt collector should provide you with a written notice, including the debt amount, creditor's name, and instructions to dispute in writing.
- Dispute the debt in writing within 30 days to pause collection efforts until the debt's verification is provided.
- Craft a strong dispute letter, including relevant evidence if you have already paid the debt.
- Send the letter via certified mail with a return receipt and retain a copy for your records.
By following these steps, you assert your rights and safeguard your financial well-being.
The bottom line
As you wind your way through the maze of debt collection laws in California, remember that being informed about the statute of limitations on debt and your rights is your best compass, and—as important—that there is help available.
Should you need extra help, it’s important to seek advice from a legal expert or financial advisor and take advantage of the guidance and protections offered by the Federal Debt Collection Practices Act.