Protect your cash when it comes to old debts
Image Source: Flickr User Steven Depolo
The Fair Debt Collection Practices Act (FDCPA) is in place to protect debtors from unscrupulous debt collection activities, and a new ruling has given it more teeth when it comes to old debts that have aged out of enforceability. Here’s what you need to know about dealing with old debts and protecting your rights.
When Do Debts Lose Their Enforceability in North Carolina?
North Carolina has pretty aggressive protections for consumers when it comes to aging of debts. Credit card and similar debts have a three-year shelf life before the debt becomes “time-barred,” which means that the creditor can’t go to court and sue you in an attempt to collect the debt.
The debt begins the three-year aging as soon as the account goes delinquent, which is usually the date of the last payment you missed. So if you had been paying your credit card on time and then miss a payment due on August 1, 2013 and never made another payment, your delinquency date should be 8/1/13.
That means that on 8/1/16, that credit card debt would be time-barred from pursuit in court. However, if you made a payment on 1/1/15 because debt collectors were calling you, the clock resets to that moment, and the debt would not be time-barred until 1/1/18. That’s a big difference.
Creditors Often Get Aggressive Just as Debts Hit Time-barred Threshold
Creditors know the delinquency date; when the unenforcabiliy threshold nears, they will try to extend their legal window to pursue you by getting you to make a payment. They might get aggressive, assign it to a pushier debt collector, and threaten to sue. Depending on the size of the debt, they might or might not follow through on their threats.
Here’s what you must know—even when the debt becomes time-barred for collecting via a lawsuit, the creditor can still try to collect the debt. They can send you a letter demanding payment and telling you the balances due, offering payment and settlement options, etc.
But what they cannot do, under the FDCPA, is threaten a lawsuit. If a creditor threatens to sue over a time-barred debt, you can sue them for violating the law, and they’ll be the one paying up in court. A new ruling has expanded FDCPA enforcement for time-barred debt.
The New Ruling for Aged Debt
A creditor, Roxanne Daugherty, was sent a letter about a time-barred debt that offered three options to settle the debt. The letter did not threaten litigation, which would be a violation of the FDCPA. Daugherty sued and lost in court but then won on appeal in the Fifth Circuit.
The ruling was based on the fact that the letter did not reveal that the debt was not legally enforceable, nor did it inform the debtor that payment of any portion of the debt would revive the legal enforceability of the debt. The court ruled that lack of threat to litigate was not enough.
The standard used is that of the “unsophisticated consumer,” which means someone who lacks knowledge about debtor protection laws and statutes of limitation for civil liability. The Fifth Circuit ruled earlier this month that the letter sent to Daugherty violated the FDCPA. The ruling read...
…a collection letter violates the FDCPA when its statements could mislead an unsophisticated consumer to believe that her time-barred debt is legally enforceable, regardless of whether litigation is threatened.
Paying Old Debts Can Wreck Your Finances
If you can’t afford to pay your debts, there are options out there to help you, including North Carolina bankruptcy. Paying even a small amount on very old debts can land you in hot water and open up the debt to future lawsuits. Be very careful with debt collectors working on old debts.
Even though this ruling makes letters illegal if they don’t inform you of the legal unenforceability of old debts, that doesn’t mean creditors will stop sending them. Debt collectors break the law on a regular basis by making threats and engaging other aggressive and illegal behaviors.
To find out more about how North Carolina bankruptcy can help you ditch the debt for good, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.