June 26, 2013

Too old for lawsuit?

Q: My father had some credit cards. He got to where he wasn’t able to pay on them and so he quit paying altogether. It has been about 4 or 5 years since he has made a payment. Now, he is 78 years old and not working and a couple of the companies have said they are going to file a lawsuit and make him pay for the credit cards. Can they do that at his age?
- Ann, Florence, AL

A: Yes they can. The only time that age has some legal effect is when a person who is a minor attempts to enter into a legal transaction. In those cases, the result is harsh simply because a minor cannot enter into a legal transaction. For example, if you sell a minor a car and he or she wrecks it and they have not paid for it (and probably even if they have) they do not have pay for the car.

Your father’s age does not exempt him from his obligation to pay his debts.

The statute of limitations for credit card debt is six (6) years. Therefore, they can still bring suit. The question that I would want answered is if they do bring suit, what can they get? If your father does not own property and lives on a small fixed income, suing him would be a waste of time. On the other hand, if he owns property and they sue him and get a judgment that judgment would go against any property that he has (or his estate after his death) for ten years after the date of the judgment.

Judgments bear interest and grow with time and currently the interest rate on judgments is 7.5% per year. It used to be 1% per month or 12% per year.

If your father does not make further charges or make further payments and six years pass, his answer to a lawsuit should plead the statute of limitations.

What I have seen is that the original credit card company such as Visa or Mastercard sells the bad debt to companies such as Portfolio Recovery who then try and collect money on the debt at a profit. I don’t think that they always have all of the paperwork that they need to successfully win a lawsuit. You have certain rights under the Fair Debt Collections Practices Act and one of those rights is to demand the proof of the debt. They have to have a document signed by the person to be charged for this debt to be a valid contract. It certainly would not hurt to send a letter demanding proof of the validity of the debt.

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