A credit card company may file a lawsuit against a debtor if he stops paying his credit card bills. In most cases, however, the credit card company will simply transfer or sell the debt to a collection agency. The collection agency will then pursue the individual for the debt. If contacting the debtor and requesting payment fails, the collection agency may file suit and seek a judgment. In Pennsylvania, judgments afford creditors additional collection options.
Statute of Limitations
In Pennsylvania, a credit card company has four years from the date the debt was originally charged off to collect the balance through the courts. If the credit card company sells the debt to a collection agency at any point during those four years, the collection agency must still abide by the original charge-off date when determining the statute of limitations for lawsuits.
Although a creditor may sue an individual over an unpaid credit card debt after the Pennsylvania statute of limitations has expired, the debtor can have the lawsuit dismissed by using the expired statute as a court defense.
Most states allow creditors with a valid court judgment to use wage garnishment to recover the unpaid debt. Pennsylvania, however, does not grant this privilege for credit card judgments. According to Pennsylvania attorney Greg Artim, an individual's wages can only be garnished for child support, alimony, back rent, taxes, student loans and criminal restitution.
A creditor holding a credit card judgment may, however, seize an individual's wages after he deposits them into his bank account by garnishing the bank account. Creditors in all 50 states must abide by federal exemptions prohibiting them from seizing social security payments, unemployment, child support and other exempt funds from bank accounts.
A Pennsylvania credit card judgment is only valid for 10 years. During that 10-year period, the creditor may utilize any legal judgment enforcement tools at its disposal to recover the debt. In addition, the creditor reserves the right to add 9 percent interest to the total judgment amount each year the judgment goes unpaid.
Once the judgment expires, the creditor may still seek payment from the debtor, but must revert back to making collection calls and sending letters. Because the statute of limitations for debt collection is shorter than the judgment enforcement period in Pennsylvania, a creditor cannot file another lawsuit once its original judgment expires. It does, however, have the right to renew its judgment for a subsequent 10-year period as long as it does so while the initial judgment is still valid.