Debt collectors trying to collect debts after the statute of limitations has expired.

We have received several reports of debt collectors trying to collect debts after the statute of limitations had expired. In a recently reported development, the FTC has imposed record fines on a debt collector for various practices, including trying to collect debts without telling the debtor they could no longer be sued due to the expiration of their state's statute of limitations, and failing to tell them that even a small payment could revive the debt by "resetting the clock". See link to the article in the New York Times:
FTC fines a collector of debt 2.5 million.

Statutes of limitation set time limits by which suit must be brought on a claim. They can arise under either federal or state law, depending on the basis for suit, or "cause of action". What statute of limitations may apply in a particular situation can be complex. It is something for which legal advice is needed. If you are the party with a claim to sue on, you need to file suit before the time expires. If you are the person facing suit, you need to know whether the time has expired.

I will focus here on the common situation, where a collector is trying to collect a money debt arising under a credit card or other "installment loan". In New Jersey, suit on such a claim needs to be filed within 6 years of the date the "cause of action accrued". And with a credit card or installment loan, the time begins running when each payment is due. Therefore, if the last payment you made was due 5 years ago, then the creditor has another year to file suit on the unpaid balance. Laws in other states will vary. Caution: this is only an example. A shorter or longer time limitation might apply to other kinds of claims. Generally the time to bring suits seeking money for personal injuries is much shorter. Always seek legal advice promptly.

Note that the statute of limitations applies only if the creditor has not already sued and gotten a judgment. Even if a suit is filed on the debt, it is up to the defendant being sued to raise the statute of limitations as a defense and/or seek dismissal of the suit. If that is not done, the defense could be waived. Of course, if a creditor files suit or tries to collect on a debt that is not enforceable in court, that could give you a right to sue under other law. But it is up to you to act to assert and protect your rights.

Anyone facing debt collection needs to be aware of statutes of limitation. If it has been a long time since your last missed payment was due, you should be very cautious and should seek legal advice.

If you enter into a payment arrangement or a "settlement agreement" to pay even a small part of the balance due, you may end up starting the clock running all over again on a debt that otherwise might not be collectible in court.

Although collectors and collection attorneys do try to collect old debts, under some circumstances this could give rise to a liability claim against them.

If a collector contacts you or you are being sued and you think you might have a basis to challenge the debt, make a written demand for proof, including signed documents and a payment history. Even better, see a qualified attorney for further advice and help.

For more about this subject and other aspects of obtaining debt relief please visit our website at http://www.nv-njlaw.com.