The Corbett Law Firm LLC

JOHN E. CORBETT, ATTORNEY AT LAW

 

___________________________________________________________________________________________

 

303 Walnut Avenue, Evesham, New Jersey, USA 08053-7016

Phone: 1-856-767-0910

Fax: 1-908-847-0369

Email: CorbettLaw@corbettlaw.net

Website:http://www.CorbettLaw.net

 


MEMORANDUM

 

To:

Users of Lawguru.com Q&A Service

From:

John Corbett

Subject:

Old Debts, Limitations Periods, and Collection Practices

 

You are probably reading this because you have asked a legal question on Lawguru.com related to the collection of very old debts or a statute of limitations related to debt collection.  Such questions are so common that I have written the following which may help you.  Please also see the caution at the end.

  1. Debts are usually governed by the jurisdiction in which they were created and the collection of debts is governed where the collection attempt is taking place.  So, there may be differences from State to State.  This information applies to New Jersey.
  2. Many times collectors will attempt to collect debts that are way beyond the statutory limits.  You should think of this any time the debt is more than six years old*.  Suits for collection of consumer debts must be brought within six years of the date of dishonor.  The date of dishonor is the date on which the creditor (not the collector) knew or should have known that the debt was overdue.  Put another way, it is the date on which the creditor could have sued.  The expiration of the limitations period is an absolute bar (stop) to a collection suit.  No matter how meritorious the claim, the suit must be filed within six years of the date of dishonor or the creditor loses the right to collect the debt forever.  Moreover, since the debt can no longer be collected, any reports of the debt must stop shortly thereafter.  Continuing to report an old debt is a violation of the debtor’s rights under the Fair Credit Reporting Act (FCRA)
  3. There are some things that can stop the statutory period from running and others that will start it again.  If a payment is made, however small, the period of limitations will start again from the next overdue payment.  That is because the creditor no longer has a reason to believe the debt has been dishonored.  The creditor has the burden of proving that a payment was made.  Some shady debt collectors will make a phony payment just to make it look like the period was extended.  Other times, a collector or even the creditor will treat a credit to the account (such as when a repossessed auto is sold) as a credit to extend the period.  These are errors at best and fraudulent practices at worst.  The only payment that acts to extend the limitations period is one voluntarily made by the debtor himself because it is the debtor’s intent that is important.
  4. Offers to settle and promises to pay can also be held to extend the limitations period.  For that reason, if a debtor wants to settle and old debt for less than full value, the services of a lawyer should almost always be engaged.  There is simply no way to gauge or explain all the ways for a debtor to lose rights in a negotiation with a clever collector.
  5. There are some things that do not restart the limitations period but will extend it.  If a debtor is out of the United States and cannot be served with process because of that fact, a court (not the collector) might decide that the period should be extended for that period.  Note that this does not happen just because the debtor is out of the country, the creditor must show that it actually filed suit somewhere and could not serve the summons because of the absence.  Special but similar rules apply if the debtor is unavailable to receive the summons by virtue of being in the military service of the United States.
  6. A debtor who has been contacted about an old debt by a collector should never admit the debt or promise to pay anything without first obtaining written verification of the debt.  The collector must provide this if requested.  What constitutes sufficient verification is a matter for the debtor’s lawyer to decide.
  7. Debtors have rights under both the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).  Googling those terms will yield a wealth of helpful information on debtor’s rights.

We sincerely hope that the information that we have provided is of help to you.    Please keep in mind that no information given in a Q&A exchange can be relied on as legal advice for your unique situation.  If you need legal advice, you should consult personally with a lawyer.  For further information, see also: http://info.corbettlaw.net/lawguru.htm

 

JOHN E. CORBETT
Attorney at Law

* The limit could be four years if the debt was for the sale of goods governed by the Uniform Commercial Code and there is no credit instrument (credit card or loan) involved.  There are other limitations periods that apply to situations other than the collection of debts.

 

Copyright 2008, John E. Corbett