Statute of Limitations for Collecting Debt

Statue of Limitations

Statutes of limitations tell the parties the drop dead date of when a certain type of action can be filed with the court. The idea being that parties ought to live without the never ending threat of litigation. Therefore, if you have a claim you must act before the statute of limitations expire or stand to lose the right to prosecute the claim.

Collection of debt has a statute of limitations just like bring a personal injury action does. Therefore, a creditor has to file a law suit within the time frame or lose the right to do. In Maryland, the statute of limitations requires that a law suit be filed within:

  1. 3 years for written contracts,
  2. 3 years also applies to credit card. To determine, the 3 years you need to look at the date of the last activity on the account or the date the account was written off as a bad debt.
  3. Breach of contract under any sale of goods and services under the UCC: 4 years after the cause of action, even if the aggrieved party is unaware of the breach.
  4. Promissory notes or instruments under seal, bonds, judgments, recognizance, contracts under seal, or other specialties: 12 years.

Keep in mind that debt collectors can collect debt after the expiration of the statute of limitations if they follow the FDCPA and other state laws. In Maryland and other states, the statute of limitations only provides a defense in the event of a law suit.  Therefore, letters and calls can keep coming long after the statue of limitations has passed so  long as those efforts do not violate the prohibitions in the FDCPA and other laws.Therefore, in our state “a debt collector may seek voluntary payment of a time-barred debt” without violating the FDCPA, even if the communication is silent as to the statute of limitations. Wallace v. Capital One Bank, 168 F. Supp. 2d 526, 528 (D. Md. 2001).

Suing or threatening to sue on a time-barred debt violates the FDCPA.

It is well-established that threatening to sue on a time-barred debt violates the FDCPA. Kimber v. Federal Financial Corp., 668 F.Supp. 1480, 1488-90 (M.D.Ala.1987). Threats to sue (and actual lawsuits) are misleading because by their nature imply that the collector can win in court when in fact the statute of limitations having expired means that they cannot survive a motion to dismiss on that issue. As a result, it is both a deception and an improper threat both of which are violations of the FDCPA.

Attempts to collect time-barred debt may also violate the FDCPA or trigger an obligation to disclose in circumstances other than actual or threatened litigation.

There is concern that consumers need protection when debt collectors seek partial payments on stale debt for a variety of reasons among the the fact that paying a partial payment may restart the statute of limitations on the entire debt

 

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