The Statute of Limitations on Debt Collection in the USA
The statute of limitations is the time period creditors or debt collection agencies have to file a lawsuit to recover a specific debt. The typical statute of limitations runs between three and six years, but vary by state, the type of debt, and whether the state law is applicable to the credit agreement.
Per Consumer Financial Protection Bureau guidelines, there are debt collection rules that must be followed in addition to ensuring the statute of limitations on a debt has not “expired”.
General State Laws on The Statute of Limitations
State laws impose time constraints wherein a consumer debt collector or medical debt collection agency can start a lawsuit. Otherwise, the claim can be “time-barred.”
In some states, the statute of limitations starts as soon as a consumer fails to make a required payment. But in others, the time limit begins ticking away from the most recent payment, even if the payment was made during the debt collection period. Thus, making a partial payment can restart the clock in certain instances.
Some of those that owe debts first choose to consult an attorney before they send a partial payment on a debt. The typical consumer debtor doesn’t always understand the statute of limitations,therefore, talking to a credible financial legal professional gives them peace of mind that they’re making the right decision.
Collectors Can Still Attempt Debt Recovery Once the Statute of Limitations Expires
Interestingly, debt collectors can attempt to continue collecting debts after the statute of limitations is over. As long as they don’t violate the law by sending collection letters or notices, most states allow them to continue requesting payments.
However, consumers are protected by the Fair Debt Collection Practices Act (FDCPA). The Act states that debt collectors who file or threaten to file a lawsuit once the statute of limitations expires are violating the guidelines. Therefore, consumers have the right to take legal action and stand a high chance of winning their cases when a violation of the Act has occurred.
In some instances, courts may award a judgment against consumers following the statute of limitations expiration date if they fail to appear in court and raise their defense.
Typically, it is the debtor’s responsibility to notify the court that the statute of limitations on their debt has expired. Depending on the specific case, they may be required to prove there hasn’t been any account activity for a specific number of years.
Attorneys Understand the Best Course of Action
When a consumer in the United States of America has a debt collection lawsuit filed against them, they should speak to a qualified attorney. After all, they have the knowledge and experience necessary to help defend their clients when the statute of limitations has expired on their debts.
That said, people can respond to collection notices by utilizing the CFPB’s sample letters. They allow consumers to get information about their debts’ ages and could help prevent further communication or exercise their rights.