If a credit card account becomes delinquent, the creditor can sue the debtor for the balance as soon as the delinquency occurs. If the creditor decides to sue and the claim is successful, the creditor can garnish the debtor's wages, seize any nonexempt property, or take funds from any known bank account.

Most creditors do not sue immediately after delinquency; they generally wait several months until the account has been charged off. In the meantime, the debtor may be charged late fees.

Late Fees

Signed into law in 2009, the Credit Card Accountability Responsibility and Disclosure Act stipulates creditors cannot charge more than $25 as a late fee on credit card accounts that are only occasionally late.

Consumers who pay their credit card bills late on a regular basis may be charged up to $35 per month in late fees. Regulations ensure that late fees cannot be combined with over-the-limit fees, and over-the-limit fees cannot be charged on accounts brought over the limit by late fees.

Charged Off Accounts

After a debtor has failed to pay an account for three to six months in a row, the creditor typically charges off the account. The charge off is noted on the consumer's credit report, and the account is then sent to a collection agency. Third-party collection agencies operate under the regulations of the Fair Debt Collection Practices Act (FDCPA).

This set of laws outlines how often a debtor can be called in a day, the right to privacy, and several other elements of debt collectors' behavior, including the fact that the collection agency cannot threaten to sue unless they genuinely plan to take the debtor to court.

Legal Action

In order for a creditor to take a debtor to court over a delinquent debt, the debt must be within a certain statute of limitations. The statute of limitations on debt varies from state to state, with the averages being between three to seven years.

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