Dealing with Debt

questions & answers

Question: I am being sued for a past credit card debt from 2002. What is the statute of limitations for collection and can the new creditor garnish my wages?

Answer:

The statute of limitations that applies depends upon what type of account the credit card holder has with the credit card issuer. If it is an open account (where there is the expectation of ongoing transactions), the statute of limitations may be three years from the last transaction with the credit card issuer. (A.R.S. § 12-543). Likewise, if there was no written contract with the credit card issuer, a three year statute of limitations may apply. However, if there was a written contract in Arizona with the credit card issuer, the statute of limitations may be six years from the last transaction. (A.R.S. § 12-548).

Generally, when a person requests and uses a credit card, he or she is agreeing to abide by the written terms of the contract with the credit card issuer. One of those terms is payment of the debt. Because a credit card holder agrees to abide by these terms, the failure to pay is a breach of the credit card contract. As a result, the credit card issuer (creditor) may ask the court to rule on the validity of the debt so that it can be collected by garnishment of the person’s wages to pay off the unpaid balance owed by the card holder (debtor).

If a creditor in a legal action against a debtor has been awarded a money judgment (for the unpaid balance on a credit card, for example), that creditor (now called the judgment creditor) can make a written request to debtor’s employer (called the garnishee) that the money owed to the creditor be taken from debtor’s (now called the judgment debtor) earnings and paid to creditor (this is the act of garnishing debtor’s earnings). (A.R.S. § 12-1598.04). There are limitations to what property or money can be garnished so that the judgment debtor is still able to survive. Generally, monies owed to the garnishee or debtor can be garnished and this includes wages, salary, commissions, bonuses and other forms of payment. For other information and answers to questions about consumer credit issues, visit the Federal Reserve Online .