Louisiana Statute of Limitations & Credit Card Charge-Off

An account is typically charged-off anywhere from 120-180 days from the first date of delinquency. Due to the fact that you are concerned with the statute of limitations protecting you from a judgment being passed against you, I would recommend that you research when the actual date of the first delinquency occurred. This can usually be found by obtaining a copy of your credit report.

Below I have provided information as to what is a charge-off and how the statute of limitations work. Please read the following thoroughly so you can have a better understanding of how the process affects you. You can also learn more in our debt help section.

Charge-off

"Charge-off" is an accounting term used by creditors when they move a delinquent account from its accounts receivable books to its bad debt ledger. This usually occurs 180 days from the date of your last payment. The fact that an account is charged-off does not mean the debt may not be collected later. The charge-off date also does not correspond to the statute of limitations on collecting a debt, or the date that an entry on a credit record must be removed. All three dates or deadlines are independent of each other and have different meanings.

You might wonder where the 180-day rule comes from. The Federal Financial Institutions Examination Council (FFIEC) Uniform Retail Credit Classification and Account Management Policy states that "actual credit losses on individual retail loans should be recorded when the institution becomes aware of the loss." According to OCC Bulletin 2000-20 "... closed-end loans (must) be charged off when 120 days past due and that open-end credit be charged off when 180 days past due."

Because an account is charged-off does not mean the creditor lacks a legal right to collect the debt. To the contrary, the creditor may move the account to its own internal collections department, or sell the debt to a third-party collection agency. At some point, and it varies by your state of residence, a debt becomes so old that it cannot be collected. This is where your state's statute of limitations comes in.

Statute of Limitations

All states have a body of statutes in their codes of law called, "Limitations of Actions," commonly referred to as the statutes of limitations. The idea behind these laws is that we as a society have decided that we do not want old debts hanging around forever -- we want people and businesses to be able to move on with their lives without worrying about being sued.

The length of time a creditor has to sue you depends on your state of residence and the type of debt. For example, many states allow longer for creditors to file suit to collect on closed-ended consumer loans than on credit card debts. Most states give credit card issuers three to four years to file suit after default, but some states allow as many as 10 years. Check out the Bills.com resources Collection Laws, and How to Tell Which Statute of Limitations Applies to Your Situation, and Statute of Limitations Laws by State to learn more.

According to Louisiana Civil Code CC 3494: Actions subject to a three-year prescription, a lawsuit on an "open account" -- a credit card -- is subject to a three-year bar to a remedy. Under Louisiana law, a non-credit card contract is considered a "personal action" and remedies are time-barred after 10 years (CC 3499: Personal action).

If a creditor files a lawsuit after the allowed time, the court may throw the case out and not allow the creditor to file suit again (called dismissed with prejudice).

However, you must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired.

Remember: The passing of the SOL does not mean that a creditor cannot sue you. It means if a lawsuit is filed you should have an absolute defense against the lawsuit if you raise the defense. Also, keep in mind that the passage of the SOL does not prevent a creditor from calling you to collect on the debt; it simply provides you an absolute defense in court if the creditor files suit.

Recommendation

Because the statute of limitations has long passed, it is unlikely (though possible as discussed above) that Capital One or a smart collection agent will file a lawsuit to collect the debt. If, however, your collection account is owned by a not-so-smart collection agent or Capital One makes a colossal blunder and does file suit, you have a statute of limitations defense available to you.

Most states allow creditors to charge reasonable interest charges and fees. Here, I doubt any judge would agree that $2,500 in fees and interest for a 5-year-old $300 debt is reasonable. In fact, it is ridiculous and would be comical if it were not true.

If Capital One still owns the account and is attempting collections itself offer the company a lump-sum settlement of $500. If, instead, Capital One sold the debt to a collection agent then make a $250 settlement offer. Why the lower amount? Collection agents buy, sell, and trade collection accounts for pennies on the dollar, and even a $250 settlement will net the collection agent a profit.

Seethe Bills.com resource Debt Negotiation and Settlement Advice to learn tips and techniques for settling debt.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com