Credit Card Debt
There are people all over Los Angeles and throughout Southern California who have found themselves in a difficult financial situation due to maxed out credit cards, exorbitant interest rates and unscrupulous debt settlement companies, and who are now desperate to find some way to obtain real relief from their debt. Credit card debt is one of the most common forms of unsecured consumer debt – Californians carried an average credit card balance of more than $10,000 in 2018 – and many consumers end up grappling with credit card debt that is difficult for them to pay off. Fortunately, freeing yourself from debilitating credit card debt once and for all is a goal you can achieve with the right attorney on your side. If you are struggling under the burden of overwhelming credit card debt, contact our Los Angeles debt relief attorneys at Resnik Hayes Moradi LLP today to find out how we can help. We offer prospective clients a free initial consultation, so you can discuss your case with a knowledgeable bankruptcy and debt relief lawyer with no obligation to hire our firm.
Reputable Los Angeles Credit Card Debt Attorneys
Unless you pay your credit card balance in full each month, credit card debt can quickly get out of hand, and paying back mounting credit card debt can seem like an impossible feat, especially for families who are struggling to pay their bills and make ends meet. One option for getting rid of overwhelming credit card debt is paying it off on your own over time, but if you can only afford to make the minimum payments each month, paying off the debt completely could take years. Fortunately, there are other viable options for relieving mounting credit card debt in Los Angeles, including contacting the credit card company to negotiate a settlement or filing for Chapter 7 or Chapter 13 bankruptcy, both of which our attorneys at Resnik Hayes Moradi LLP can help with. Our trusted debt relief attorneys can help you explore all your options for taking control of your financial situation and wiping out your debts for good. At Resnik Hayes Moradi LLP, we are committed to protecting the rights of our clients and we understand that all bankruptcy and debt relief cases in Los Angeles are different, requiring the individualized attention and expertise of a seasoned attorney.
Understanding Credit Card Debt
When you obtain a credit card or sign up for a credit agreement, you are essentially entering into a contract with the creditor, in which you agree to make payments each month on the principal balance and interest until you have repaid the borrowed amount in full. Unless you pay off your credit card debt in full each month, you will carry a balance, which accrues interest each month, and if you fail to make payments on time, you will also accumulate late fees and penalties, all of which results in increased credit card debt. Credit card debt is a type of unsecured consumer debt, meaning it is a personal debt, not a business or government debt.
Refusing to Pay Credit Card Debt
When you enter into a contract with a credit card company, you are promising to pay back any debts you incur, and under California law, you are legally required to do so. However, there are state and federal laws in place in California that give consumers the right to refuse to pay a credit card bill in certain situations, including the following:
- Billing error – If there is an unauthorized charge on your credit card bill, if you purchased goods or services that were not delivered, or if you purchased goods or services that were misrepresented, you have 60 days from the date you receive the credit card statement to write a letter to your card issuer explaining your refusal to pay.
- Claims and defenses – You can also refuse to pay if you have a dispute with the merchant or business that charged your credit card, and you have already made an effort to obtain a refund. This is known as a “claims and defenses” dispute and only applies to businesses located in California, within 100 miles of your home.
Statute of Limitations for Credit Card Debt
The state of California has established a four-year statute of limitations for the collection of unsecured debts like credit card debt (except in the case of an oral contract, in which case the statute of limitations is only two years), which means lenders in California are barred from filing a lawsuit to collect payment on debts that are more than four years past due. In other words, in California, most credit card companies and their debt collectors only have four years to sue you for payment on a credit card debt, after which they lose their right to take legal action against you and force you to pay the debt. The statute of limitations for credit card debt in California begins when your credit card account becomes delinquent, meaning you have missed a payment.
Why the Statute of Limitations Matters
In order to force you to repay a debt, the credit card company or debt collector is first required to file a lawsuit against you and obtain a judgment from the court. At this point, the credit card company can either garnish your wages (withhold a certain amount of money from your paycheck) or take money directly out of your bank account (known as levying against your account) to repay the debt. If you owe substantial credit card debts in Los Angeles and your creditor fails to sue you before the statute of limitations expires, the company is no longer legally permitted to obtain a judgment against you and use wage garnishment or levying against your account to collect on the unpaid debt.
The Rosenthal Fair Debt Collection Practices Act
Beginning in 2019, all debt collectors in the state of California, including credit card companies collecting their own debts, are required to notify debtors when their debts have become “time-barred,” meaning the statute of limitations has expired and the creditor is no longer able to sue for payment. This notice requirement was added to the Rosenthal Fair Debt Collection Practices Act, a state law that mirrors the federal Fair Debt Collection Practices Act (FDCPA), which regulates the conduct of debt collectors and prohibits creditor harassment.
What Credit Card Companies Can do to Collect
Even if the statute of limitations has expired and the credit card company loses its right to sue you for payment, that doesn’t mean the company can’t use other tactics to attempt to get you to pay back the debt. Creditors who no longer have the option of filing a debt collection lawsuit against you can still make harassing phone calls or send threatening collection notices to try to collect the debt from you, or they can harm your credit by reporting the debt to credit reporting agencies.
How Bankruptcy Can Help
With a four-year expiration date on a creditor’s ability to sue you for an unpaid debt, some people think that they can rely on the statute of limitations as a means of getting out of debt and solving their financial problems. However, even after the statute of limitations on a delinquent debt expires, the unpaid debt doesn’t just go away. It will remain on your credit report for seven years and the creditor can still take other actions to collect the debt from you, including calling you or sending you collection letters. There are also some situations in which the statute of limitations can be restarted, in which case you could find yourself facing a debt collection lawsuit long after the four-year deadline has passed.
There is one definitive way you can protect yourself from a creditor seeking payment on a past-due debt, and that is by filing for bankruptcy. When you file for Chapter 7, Chapter 11 or Chapter 13 bankruptcy in Los Angeles, what is known as the “automatic stay” goes into immediate effect, and this injunction means the credit card company you owe money to must stop all efforts to collect payment on the debt. This generally includes wage garnishment, harassing collection calls or letters, and debt collection lawsuits, among other unfavorable collection actions you may be experiencing.
Discharging Your Credit Card Debt
If you choose to file for bankruptcy protection under Chapter 7, which is the most common type of bankruptcy filing in Los Angeles, the bankruptcy trustee appointed to your case will liquidate, or sell, any assets that aren’t exempt in order to pay back your creditors. A Chapter 7 bankruptcy filing can effectively eliminate all or a portion of your unsecured debts, including any credit card debts, at which point you will no longer be responsible for repaying the discharged debts. If you have regular income and can afford to pay back a portion of your debts without liquidating your assets, and your debts don’t exceed the Chapter 13 debt limits, you may qualify for Chapter 13 bankruptcy, in which case you can propose an interest-free repayment plan to pay back all or a portion of your unsecured debts, including credit card debts.
A bankruptcy filing will remain on your credit report for up to ten years, depending on the type of bankruptcy you file, which is a long time, but that doesn’t mean you have to wait ten years to start building your credit again and get your finances in order. Many people think of bankruptcy as a last resort for resolving their debts, but filing for bankruptcy to get out from under overwhelming credit card debt can actually be a positive step towards rebuilding your credit and establishing a strong foundation for your financial future. You can still get credit after you file for bankruptcy in Los Angeles and with your debts discharged or reorganized into an affordable repayment plan, you can rebuild your credit gradually and responsibly.
Negotiating a Debt Settlement
Another way to resolve significant credit card debt that you can’t afford to pay back is to negotiate a settlement with the credit card company or its debt collector. If you don’t have the money to repay the credit card debts you owe in full and you don’t want to file for bankruptcy, you can contact the creditor and propose an agreement where you pay less than the total balance due in order to satisfy the debt. Otherwise known as credit card debt settlement, this type of negotiation means you can reduce your debts and pay back a fraction of what you originally owed, while the credit card company still recovers some of its loss. Even if you settle a debt, which is generally a better alternative to leaving the debt unpaid altogether, the debt settlement can negatively affect your credit score. But even so, debt settlement may be a good option for you if you can’t pay your credit card bills in full and you want to eliminate some of your debt without filing for bankruptcy.
Be Wary of Debt Settlement Companies
You should be wary of companies that claim they can help you settle, renegotiate or change the terms of your debt and the advice they give you about reducing or eliminating your debt. For instance, some debt settlement companies will advise debtors to intentionally fall behind on their credit card payments in order to improve their chances of having a settlement payment on the debt accepted by the credit card company. While it is true that creditors may be more motivated to settle debts if there is a risk they won’t be paid at all, missed payments on your credit card bill will damage your credit before you even negotiate a settlement of the debt.
Consult an Experienced Debt Relief Attorney
The very best way you can educate yourself on the various options available to you for reducing or eliminating your debt is to consult a knowledgeable debt relief attorney with experience handling cases in Los Angeles and the surrounding area. At Resnik Hayes Moradi LLP, our attorneys have represented thousands of clients in bankruptcy and debt relief cases in Los Angeles, San Bernardino, San Fernando Valley, Riverside, and Orange Counties, and we have the knowledge and skill necessary to help you make the best possible choice for your financial situation. Contact our law firm today to schedule a free initial consultation with one of our seasoned Los Angeles bankruptcy attorneys.