Using credit cards can create financial challenges especially if consumers do not watch their spending and do not understand how interest is calculated. Credit card users with consumer debt who experience unemployment, reduced income and increased expenses may face creditor harassment because of delinquent payments. Consumers in Pennsylvania and across the country who are making only minimum payments on a credit card to their credit card company could benefit from understanding how credit card interest is calculated.
People in Pennsylvania who are dealing with unpaid obligations and are being harassed by bill collectors may be able to hold those collectors accountable for their actions. If debt collectors violate the Fair Debt Collection Practices Act, debtors have the right to sue them. Every infraction committed by a debt collector could result in a judge ordering the debt collector to pay a $1,000 statutory award to the plaintiff.
For Pennsylvania debtors, the statute of limitations on unpaid credit card debt may come as a welcome relief. Statutes of limitations prevent debt collectors from filing civil lawsuits against a debtor beyond the time period set forth therein. Debtors should be aware, however, that the statute of limitations does not prevent the creditor from seeking to collect on the debt in other ways.
Pennsylvania residents may be surprised to learn that the Internal Revenue Service considers forgiven or cancelled debt to be income. Consumers who reach agreements with creditors to lower the amount they owe are often surprised when they subsequently receive a cancellation of debt notice from the IRS. The agency learns about the arrangement because creditors are required to notify them when an outstanding balance is reduced by $600 or more due to debt forgiveness or cancellation.
In Pennsylvania, creditors wishing to sue a debtor for payment generally have four years after the debt becomes delinquent in which to do so. Although four years is the statute of limitations in Pennsylvania, a judge may sometimes rule that the debt is subject to the state laws where the credit card was issued from. For instance, debt on a Wells Fargo credit card might be subject to a six-year statute of limitations, as the card is issued out of South Dakota.
Pennsylvania readers might be interested to learn that, according to ProPublica and National Public Radio, 10 percent of working people in the U.S. aged 35 to 44 are subject to wage garnishment. Many of the garnishments are because of student loans, medical or credit card debt.