Millions of consumers today rely on the use of credit to pay for everyday expenses like vehicles, groceries, and clothes. Credit card debt, in particular, has skyrocketed to over $1 trillion. However, debtors should understand that there is a period of time, known as a statute of limitations (SOL), that creditors can file a lawsuit against the debtor to collect the debt.
The Statute of Limitations
The SOL is a certain window of time when a creditor can sue a debtor for failing to pay a particular debt. Generally, the SOL begins to run when cause of action accrues. Or, in other words, the date of the last payment made by the debtor. During this window, the creditor can legally pursue the unpaid debt. After the window “closes,” the creditor can no longer go after the debtor for payment.
The SOL period is different for different kinds of debt obligations. And each state sets different limits for different contracts. In Georgia, however, the rules are as follows:
- Oral Contracts: In Georgia, the corresponding period of limitation for oral contracts is 4 years. An oral contract is essentially a verbal agreement or “handshake.” This form of contract is legal, however difficult to prove in court.
- Written Contracts: The statute of limitations period to collect on debt for a written contract in the state of Georgia is 6 years. A written contract is an agreement between two or more parties in written form.
- Promissory Notes: The statute of limitations period in Georgia to collect on debt for a promissory note is 6 years. A promissory note is essentially a written contract, yet different in that a promissory note typically includes specific details like scheduled payments and interest. One example is a mortgage document.
- Open-End Accounts: The statute of limitations period to collect on debt for a open-end account in Georgia is 4 years. An open-end account is a revolving line of credit with varying balances. One example is a credit card. However, in a 2008 Georgia Court of Appeals decision, a judge ruled that the SOL in Georgia for credit card debt is actually six years–despite the Georgia statute limiting credit card obligations to 4 years. This, unfortunately, happens often. Statutory law conflicts with court decisions in many cases. When this occurs, court rulings typically take precedent.
It’s also important to note that, according to Section 811 of the Fair Debt Collection Practices Act, debt collectors may file suit either in the state the debtor signed the contract or the state the debtor lives. Different SOL rules may apply to a debtor residing in Georgia, for instance, who signed a contract in another state.
Exceptions to the Limitations Period
Like all areas of law, debt collection is not black and white and consumers should understand that there are always exceptions to the rule. For instance, a contract signed “under seal” typically has a longer SOL than an ordinary contract.
Additionally, a debtor must be careful while making partial payments of debt where the SOL has passed. Known as “re-aging,” the clock on the SOL may restart if a debtor makes even a small payment. Any new activity on an old debt could restart the SOL period all over again, opening up the potential for the creditor to once again legally pursue the debt.
Due to the multifaceted aspects to this rule, speaking with a Georgia bankruptcy attorney is advised if you have questions about the statute of limitations surrounding your particular debt.
Article provided by The Slomka Law Firm, P.C.
Visit us at www.slomkalawfirm.com
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