I frequently receive calls from consumers asking about olds debts and collection. People want to know how long a debt can be collected on and the length of time the debt can be reported for on a credit report. I am often asked about how a collector or lawyer can be collecting on an account that is several years old. Each state has its own laws known as statutes of limitations. A statute of limitations is a law that provides the period of time in which one can sue another for a loss. In the world of debt collection, the kind of case that is typically brought by creditor against collector is a breach of contract case. Thus, the consumer wants to know what the statute of limitations is for a breach of contract in their state. You must refer to your state to determine the exact length of time and make sure to take into consideration where the debt was incurred and what type of debt is being collected.
Once a debt is beyond the statute of limitations it is considered “time-barred.” When a debt is time-barred, it does not necessarily mean that a collector cannot attempt to collect the debt. In most states, they still can, but the collector cannot file suit against you and cannot threaten to file suit (as it is a violation of the Fair Debt Collection Practices Act (“FDCPA”) to threaten to take action that cannot legally be taken).
While the FDCPA was designed to protect consumers in this situation, it does not mean that a collector won’t try to file. Often times, collectors purchase old debts for pennies on the dollar and begin contacting consumers for collection even though the debt is beyond the statute of limitations. Collectors often file suit against debtors in this situation, knowing that most debtors will fail to appear in court and the collector will receive a “default judgment”, granting them the right to collect on the debt. Collecting a judgment usually means garnishment of a debtor’s bank account or wages. If a lawsuit is filed within the statute of limitations period, then there is no longer an issue regarding a debt being time-barred. Once that lawsuit is timely filed, the statute of limitations is complied with.
Determining when the statute of limitations begins is another area of concern for debtors. Debtors often comment that the account is from the late 90s or early 2000s so how can a creditor collector? The statute of limitations begins to run from the date of your last delinquency or the date of your last payment and not when the account was opened. In some states, if you make any payment on the account, the debt comes back to life and the time period begins anew.
In the event you are contacted by a collector for a debt that you believe is beyond the statute of limitations, make sure to know your rights under the FDCPA to help protect yourself. First, ask the collector to send you notice of the debt in writing, if you haven’t already received a letter. After receiving an initial collection letter, you have 30 days to dispute the debt and request validation or proof of the debt’s legitimacy. During the validation period the collector is prohibited under the FDCPA from contacting you to collect on the debt. During this time, find out your state’s statute of limitation, so when you receive a response from the collector you can let the collector know whether or not the debt is beyond the time period for collection.
If you are being contacted by a collector for a debt that is too old and believe it may be beyond the statute of limitations, contact SmithMarco P.C. for a completely free case review.