How Old Debts can Lead to Seized Assets

Dear To Her Credit,

A credit card company emptied my bank account last August of over $400 for a debt from 2001. That's when the credit card account was opened. They are now saying that the district court granted permission to attach my wages. This debt is 12 years old, so how is that possible? Do you have any advice? Also, I have no wages to attach.

- Lori

Dear Lori,

Unless you immediately ran up the total balance when you opened the card 12 years ago and haven't done anything to restart the statute of limitations since, this debt may not be considered as old as you think it is.

People often assume that a debt is as old as the account, or at least as old as the last time they used it. However, the statute of limitations generally starts on the date of last activity, which is a bit harder to figure out.

A number of things can restart the clock for the statute of limitations, including:

Making a payment on the debt.
Admitting on the phone or by mail that the debt is yours.
Agreeing to a payment plan.
Making a new charge on the account, no matter how small.

To find out if this debt is past the statute of limitations, look up the statute of limitations in your state. Generally, the laws of the state you lived in when you signed the contract apply. However, in some cases the laws of the issuer's home state apply instead.

Next, you need to know when the date of last activity was on your account, as reported by the creditor. You can find this by looking on your credit report, which you can pull for free once a year from one or all of the top three credit bureaus (Equifax, Experian and TransUnion) at AnnualCreditReport.com. The creditor can also tell you this information, but be very careful when talking to them. Make it very clear that you are not affirming the debt or agreeing to anything by discussing it, or you'll start the clock all over again.

If the account truly appears to be beyond the statute of limitations, you still can't just ignore it. Creditors will try to sue you for long-ago debts, and if you don't show up in court or prove that the debt is past the statute of limitations, you can lose the case. That appears to be what happened to you.

If the court ruled against you because you didn't respond, or perhaps you didn't receive the notice, you may be able to reopen the case and prove that it is past the statute of limitations. On the other hand, if it turns out that the debt is not past the statute of limitations, for example, if you made your last payment or purchase just a few years ago, you'll have to deal with the debt differently. In either case, I recommend you get legal advice in your state, perhaps from a low-cost legal assistance program, for how to deal with and resolve the debt.

After the creditor attaches your income or assets, it's too late to negotiate a payment plan directly with the creditor. You'll have to deal with the court if the garnishment makes it difficult for you to live or to pay your other bills.

Don't be tempted to ignore this debt further by the fact that you have no wages. An ignored debt will be waiting for you, growing all the time, until you do have wages or the collector finds some other income or asset of yours to satisfy the debt. It's always better to face the problem, so you can move forward without carrying the burden of unresolved debts and judgments.