Statute of Limitations, Credit Report & Judgment

Submitted by abu31july on Fri, 09/10/2010 - 17:33

In 2008 I was summoned to appear in court for a cc (Capital One). I didn't go to court. I was given a default judgment. The judgment was not on my credit report nor have they garnished my wages. The credit card account is scheduled to fall off my report in March 2011. Can they still come after me or when March comes? They will no longer be able to collect because of SOL. I want to buy a house around June of next year. Will this come back to haunt me? I stay in GA.

Your question contains a key misconception about the law that I think will be corrected by the time you reach the Recommendation section below.

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 don't 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 Collection Laws page.

The page I just mentioned has more information about statutes of limitations and a list of limitations by state. If a creditor files a lawsuit after the allowed time, the court will usually 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. Although the periods vary from state to state, I believe that there is only one (Ohio) that is longer than 10 years.

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.

In Georgia, the statute of limitations for domestic judgments is seven years. In other words, a Georgia judgment is valid for seven years, unless it is renewed.

Credit Report and the 7½-Year Rule
Federal law (US Code Title 15, §1681c) controls the behavior of credit reporting agencies. This law is known as the Fair Credit Reporting Act (FCRA). Under FCRA §605 (a) and (b), an account in collection will appear on a consumer's credit report for 7½ years. The clock starts approximately 180 days after the date of first delinquency on the account. To learn when an account will be removed by the credit reporting agencies (TransUnion, Equifax, and Experian and others), add 7½ years to the date of first delinquency. Subsequent activity, such as resolving the debt, is irrelevant to the seven-year rule. However, if the debt is a tax lien, that can appear for seven years from the date of payment. A bankruptcy will appear for ten years from the date of the final order. Delinquent federal student loans can be reported indefinitely, i.e., for as long as they are delinquent.

Just because a debt is removed from a credit report does not mean the statute of limitations for receiving a judgment to collect the debt has passed. Federal credit report laws and a state statute of limitations laws are separate and independent from each other. The 7½ years starts running from the date of first delinquency, which generally means 7½ years from the date of last payment. Review your credit report carefully to make sure the date of first delinquency being reported on these accounts are correct.

The creditor has a cause of action when the debtor defaults. If the creditor files a lawsuit and wins, the court will make its formal finding known in a document called a judgment. With a judgment in hand, a judgment-creditor has the right to collect the amount of the judgment using legal means. These vary by state and include wage garnishment, account levy, and lien. See the resource Georgia Collection Laws and if you reside in another state, Judgment Garnishment.

The federal laws controlling the behavior of credit reporting agencies and what and when derogatory items can appear on a consumer' credit report are irrelevant to a judgment-creditor's ability to collect on a judgment. A credit report is not a legal record. Indeed, creditors have no requirement to report judgments or a credit account to the credit reporting agencies.

The fact that the judgment-creditor here has not yet reported the judgment on your credit report does not mean it will continue to not report it. Your most conservative option is to negotiate a settlement with the judgment-creditor. Make a negotiating point a requirement that it not report the judgment. Alternatively, if it has reported the judgment then make it a condition of the settlement that it remove the judgment.

I hope this information helps you

Fri, 09/10/2010 - 17:48 Permalink

Hi abu,

Just because a debt is removed from a credit report does not mean the statute of limitations for receiving a judgment to collect the debt has passed. Federal credit report laws and a state statute of limitations laws are separate and independent from each other.

This is very true. The SOL on reporting and SOL on debts are two very different issues.

Great information Jassica.


Sat, 09/11/2010 - 07:55 Permalink

plus this is an unpaid judgment. Crap 1 can renew it and take other legal actions (liens garnishments etc)

Sat, 09/11/2010 - 12:05 Permalink
crorkz (not verified)

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Tue, 08/05/2014 - 20:42 Permalink