I have not heard from the credit card company I owe for a long time. Should I still file bankruptcy?
Probably not, although you should make sure that you could file a bankruptcy promptly if the need arises. I spoke with a client earlier this week whose only significant debt is a single credit card. Unfortunately, the balance is so high that she would want to file bankruptcy if the creditor pursues her.
She has not heard anything from the creditor for well over a year, though. I therefore advised her that she need not file a bankruptcy at this time, but should let me know if she hears further from the creditor. Our hope is that she will not and that the statute of limitations will eventually run. If that happens, she will never need a bankruptcy, as the debt will become unenforceable and un-collectible.
A credit card is a form of contract. In Wisconsin, the statute of limitations upon a contract is 6 years. Six years from the date of your last charge on the account or the date of your last payment, whichever is more recent. (See Wis. Stats. § 893.43). If suit is not commenced within that time, it is barred.
I advised our client to make no payments upon this accounts. Even a partial payment prior to the 6 year expiration date will toll the statute and start her 6 years running anew from the date of payment.
This would seem at first glance to be against the best interest of the consumer. However, the policy behind this extension of the statute of limitations upon partial payment is really to encourage settlement. Creditors may accept partial payment, and are more likely to forego suit and accept the payment, if they know that the statute of limitations will not expire as a result.
Using the statute of limitations instead of bankruptcy is one of the many strategies we employ for our clients to solve financial problems. Always consider all of your options before taking action. Contact us for an analysis of those options.