What’s the danger in making a payment past the Statute of Limitations?
What’s the danger in making a payment past the Statute of Limitations?
Debt collectors must sue within the Statute of Limitations.
If they sue on a debt that is past the Statute of Limitations (also known as a time-barred debt), they violate the FDCPA.
This time period to sue will vary depending on your state and the type of debt.
In Alabama, it could be 3 to 6 years. Other states can be different.
Whatever the time period is in your state, if it is beyond the Statute of Limitations, the debt collector cannot sue you.
They should not sue you once the Statute of Limitations has expired.
If they do, you can sue them under the Fair Debt Collection Practices Act (FDCPA).
Let’s say there is no lawsuit. You have seen the collector on your credit report, they send you a letter, or they call you.
Maybe it’s an old $8,000 and they try to set you up with some sort of payment. Something small like $10 per month. Seemingly nothing.
They say there is no harm in doing this, it’s just a small amount that you can afford to pay each month.
You decide to pay.
What is the danger of making this payment from a legal standpoint?
Depending on your state, the judge may determine based on your laws that this payment restarts the Statute of Limitations.
For example, your state has a 3-year Statute of Limitations.
The collector contacts you 5 years later, well beyond the Statute of Limitations for your state.
You agree to start paying them $10.
This small payment may be enough for the debt collector to believe they have restarted the Statute of Limitations, and now they have another 3 years to sue you for this debt.
Even though they may say “Oh, there’s no harm, it’s not really going to cost you anything.”
This may be a very big deal. You may be sued for this debt because you made that $10 payment.
Recently, we discussed why debt collectors may lie about getting these payments. It is the same reason – they want to extend their time period to sue.
But now, this is not a lie concerning you making the payment, it is a lie to convince you to make a payment.
If you make the payment, they tell the judge the payment has reset the Statute of Limitations.
I want you to be aware that there is a danger in making even a small payment to a debt collector on a debt that is time-barred.
You may have just restarted the Statute of Limitations and the whole leverage shifts.
When a debt is time-barred, the debt collector can only call and write you letters which can be stopped using a cease and desist letter.
If they are within the proper time limits (7 to 7 1/2 years), they can also still credit report.
Your Statute of Limitations may be shorter than the time period to credit report , which means they could credit report but not be able to sue you.
But if you pay that $10, now they may be able to sue you.
They may try to get a judgment, sue you, or garnish your wages.
Make a decision before you pay.
Ask them, on their recorded line, “If I make this payment, is there any chance that will restart the statute of limitations?”
If they say no, and then they do, then they have lied to you about this.
If they lie to you about this, they violate the FDCPA.
I had a case many years ago against a mortgage company that qualified as a debt collector under the FDCPA.
They told my client that if he did a certain thing, they will not foreclose on him. And then they foreclosed anyway.
So we sued them. Their argument was, “It’s a legal thing, you can’t really hold us to that.”
But the judge said the mortgage company lied and this violated FDCPA Section 1692e.
This is just another way many debt collection companies will try to take advantage of consumers.
Always be very, very careful when dealing with debt collectors.
If we can answer any questions for you, call us at 205-879-2447 or fill out our contact form.
Thanks and have a great day!
John Watts