The holidays are a time when people spend extra money. Whether we use them for presents, travel, or festivities, many of us depend on credit cards to get the seasonal extras. Even those with a healthy fear of debt can find it hard to avoid using them to make the holidays special or to get that perfect gift for a loved one. Once the trips are over and the decorations are pulled down, opening the credit card statement can be a sobering experience. Holiday expenses can push your debt over the tipping point–from being a manageable hassle to a serious problem. It is important to have a strategy for facing debt that provides for unforeseen difficulties in repayment.
Credit card debt is one if the most common reasons people declare bankruptcy. Fortunately for consumers, it is generally one types of debt dischargeable under bankruptcy. Most credit cards are unsecured debt, which allows it to be discharged completely at the end of the process.
The exception to this is debt incurred by false representation or fraud. An example of this is when someone knowingly takes on the debt, hoping to have it cleared by bankruptcy. Any credit card debt of more than $500 incurred within 90 days before you declare bankruptcy is presumed to be non-dischargeable. Cash advances of more than $750 within 70 days of declaring bankruptcy are also presumed to be non-dischargeable. It will be up to you to show that the debt was spent on essential goods or services, such as food or housing. Note that simply waiting 91 days before declaring bankruptcy does not necessarily mean you can assume the debt will be discharged, and essential purchases made within this period may be discharged. Unless a creditor files an objection, however, the debt will usually still be forgiven.
It is good to know the statute of limitations on your credit card debt. Louisiana has a three year statue of limitations on credit card debt. This runs from the date the bill was incurred or the last payment on the account. Creditors cannot sue you for credit card debt after three years have passed, since the debt first became due or was last paid.
In practice, debt collectors can make it difficult for you to take advantage of the statute of limitations. The collector may offer to extend the time that you have to pay the debt. If you agree, the “clock” counting down until the statue runs out is paused and does not begin until after the extended time period is passed. Creditors may also try to persuade you to waive the statute of limitations. If you make a partial payment on a debt, or acknowledge that you owe it, then the statute of limitations may be revived, giving them more time to sue you to collect.
An agreement or written agreement to repay a debt may also carry its own statue of limitations, with typically have longer statutes of limitations than typical credit card debt (In Louisiana, it’s ten years.). A lawyer can help you navigate these ambiguities.
It’s best, of course, to avoid debt, but this isn’t always possible. When facing creditors, be aware of every tool at your disposal. After all, that’s what they do. You need to know every legal recourse you have, including someone you can go to who can help you understand your options.