Criteria for Credit Card Uncollectable Debt

Credit card debt becomes uncollectible when the liabilities of a person who has a defaulted credit card account exceed his assets and ability to pay. Usually, this determination is made after a debtor seeks protection from his creditors by filing for bankruptcy.

Determination

A debtor is considered judgment proof if he has insufficient assets or income that can be attached to satisfy a civil judgment obtained by a credit card company.

Statute Of Limitations

Credit card debt may be considered uncollectible if the statute of limitations for bringing a civil action for repayment of the debt has expired. Although the statute of limitations does not technically extinguish the debt, a credit card company would be precluded from filing a court action to enforce payment.

Discharge In Bankruptcy

In certain circumstances, a bankruptcy court may order the debtor's unsecured credit card debt discharged.

Bankruptcy Reorganization

Depending on the financial condition of the debtor and his earnings capacity, a bankruptcy court may reduce the amount of the credit card debt and establish a repayment plan. In these circumstances, the credit card company would not be entitled to the full amount of the default credit card balance.

Considerations

A credit card company may have its own criteria for establishing when the defaulted accounts of its cardholders become bad debt. When the credit card company writes off the delinquent debt on its balance sheet, it has made a determination that the debt is uncollectible.

References

• Ticker Forum: Proposed Bankruptcy Rule Spells More Pain For Credit Card Company