California debt: four years to sue, then no lawsuit at all

Four years for an action on a written contract, and four years on a book account, an account stated or an open account (Code of Civil Procedure section 337). Two years for a contract not founded on a writing (section 339).

For most credit cards, store cards, personal loans and medical bills, that means four years. The clock usually starts at the missed payment that put the account into default, not when the account was sold or charged off.

Section 337a now says a "book account" does not include consumer debt incurred on or after July 1, 2024 where the duty to pay appears in a note or written contract, so a collector cannot recast those accounts as book accounts.

For California residents with old accounts, the 4-year limit is the key date; our zombie debt guide explains why.

Limits vary a lot between states: by comparison, Hawaii sets 6 years and Minnesota sets 6 years for similar debts.

Not sure a California collector is genuine? Check our guide to fake debt collectors, then ask for validation in writing.

If your letter comes from a national company such as Crown Asset Management or Enhanced Recovery Company, our collector guides explain who they are and how to dispute.

Once the four-year period in section 337 has run, a person may not sue, or start an arbitration or other legal proceeding, to collect the debt. The period can be extended only under section 360. This bar was added by AB 1526 in 2018.

Federal law already stops collectors from suing on time-barred debt. California goes further: the bar covers "a person", which includes the original creditor, and it covers arbitration as well as court. California's fair debt buying statutes bar a debt buyer from suing or starting arbitration on a consumer debt once the limitations period has expired, for debt sold or resold on or after January 1, 2014.

Section 337's period can be extended only under section 360, which covers acknowledgments and promises. So be careful about signing anything that acknowledges an old debt or promises to pay it. Paying voluntarily is still allowed; the debt does not disappear, only the right to sue over it.

A creditor can only garnish wages after winning a court judgment. After a judgment, a wage garnishment may take no more than the lesser of 20% of weekly disposable earnings or 40% of the amount by which they exceed 48 times the state minimum hourly wage. Where the local minimum wage is higher, the local rate is used.

This limit was lowered by SB 1477 (2022); before it, the limit was the lesser of 25% or 50% of the amount above 40 times the minimum wage. In practice, that means people earning close to the minimum wage keep all or nearly all of their pay. If even the reduced amount would leave you unable to support your family, you can ask the court for a larger exemption.

California's protections sit on top of federal law; our page on stopping a wage garnishment explains both.

The Rosenthal Fair Debt Collection Practices Act (Civil Code section 1788 and following) applies fair-collection duties to original creditors, not just third-party collectors. So a bank or hospital collecting its own bill has to follow fair-collection rules in California, even though the federal law mainly covers collectors and debt buyers.

Collectors are licensed by the Department of Financial Protection and Innovation (DFPI); collectors print their California license number in their disclosures. If a collector cannot give you its California license number, ask why. You can complain to the DFPI as well as to the CFPB.

Most debt lawsuits end in default because people do not respond; our page on what to do if a debt collector sues you explains how to avoid that in California.

The dispute rights come from federal law, and they are the same in every state: a written dispute inside the validation period makes the collector stop until it mails verification. The check on this page starts with California already selected.

Debt buyers collecting in California, such as Velocity Investments, list California-specific rights in their own disclosures. Credence, Crown and Velocity all print California license numbers.