People in debt fear getting a call or letter from a collection agency about the money they owe. While debt collectors have some power, there are outer bounds on what they may do when dealing with you. There are protections in the process on what they may say to you, and limits on how much time they can try to collect your debt.
If debt collectors have violated the law, you can sue them in court and make them pay for violating your legal rights. An experienced debt collection defense attorney in California can review your case and tell you whether you have a potential lawsuit. The Fair Debt Collection Practices Act and California state law allow you to sue debt collectors. Your lawyer will advise you which law may be more advantageous to you if you have a case.
If you do not already have a debt collection attorney, it is time to call one today. It costs you nothing out of pocket to speak to an attorney and get them fighting on your behalf.
What is a Statute of Limitations in Civil Court?
In civil court cases, there is a legal principle known as the statute of limitations. This sets a time limit within which a plaintiff must file a lawsuit. Once this time limit has passed, the plaintiff loses the right to bring the case to court. Statutes of limitations vary depending on the type of case and the state where it is being filed.
The purpose of the statute of limitations is to ensure that cases are brought to court in a timely manner, allowing for a fair and efficient resolution. It also protects defendants from being sued for events that occurred too far in the past, when evidence may be less reliable or witnesses may no longer be available.
Every civil cause of action has its own statute of limitations, and every party filing a lawsuit must know the time limits for the specific case. This includes debt collectors who are filing a lawsuit against consumers to collect money on unpaid debts.
Debt Collectors Must Sue You to Get a Judgment
While there are federal laws that limit what debt collectors can do, state statutes govern many of the nuts and bolts of debtor law, including the statute of limitations. Fundamentally, debt is a contract between a borrower and a creditor. Creditors lend you money, and you are legally obligated to repay it. If you fail to pay your debt, you are in breach of contract, and creditors have certain rights against you. The only way they can fully enforce those rights is through the law.
Creditors may sell the debt when the debtor fails to make payments on it for at least 180 days. They must do so by accounting laws because they cannot keep bad debt on their balance sheets. Then, a debt collector will enter the picture and buy the debt for far less than its face value, allowing creditors to receive some money for it and close out their books. The debt collector will then begin efforts to collect from you.
Debt collectors cannot simply take your money and must go through a legal process before they can get it. First, they will call you to persuade you to pay the debt because they want to avoid taking you to court. However, if you do not pay within a specific time, debt collectors may initiate legal action against you.
The time debt collectors have to sue is a function of state law. Since credit is a contract between you and the creditor, the resulting lawsuit will be a breach of contract case. Any rules that apply to contract cases will apply to the debt collection lawsuit.
California Law Aims to Be Fair to You as the Debtor
The law imposes a series of limitations on plaintiffs regarding their time to sue and makes several policy choices to balance the interests of participants in the legal process. The statute of limitations exists to be fair to defendants because it is unfair for them to be on guard for a potential lawsuit indefinitely. If the plaintiff surprises a defendant years into the future with a lawsuit, the defendant may no longer have the proof that tells their side of the story.
Many people are familiar with statutes of limitations in personal injury cases. For example, attorneys will tell you you have limited time to file a lawsuit to collect compensation. In California, you have two years from the date of a personal injury to file a lawsuit. If you do not meet the deadline, you will lose the right to seek compensation forever.
Debt collectors also have legal limitations to keep things fair. In a breach of contract case, creditors will have four years from the date of the breach of contract to file a lawsuit against you. The statute of limitations will begin to run when there is a breach of contract. For debt collection actions, a plaintiff will have four years from the date of either the last advanced credit or payment made.
Debt Collectors Cannot Sue You for Debts Beyond the Statute of Limitations
In other words, debt collectors cannot sue you for an old debt once the deadline has passed. In theory, they should not want to buy old debt because there is far less chance that they can collect anything. Debt is worth more when the collectors are more likely to receive something for it. They often compete with other debt collectors to buy the debt, calculating their potential profit.
Some debt collectors will use highly unscrupulous methods to make money at your expense. They may buy older debts to purchase the obligations for next to nothing and then file a lawsuit. Their primary purpose will be to obtain a judgment against you. Once the debt collectors have a judgment, they can take action to garnish your income and seize your property, such as bank accounts. The key is for the court to give them the right to collect after a successful lawsuit.
However, if the statute of limitations expires, there is no jurisdiction for them to sue you in the first place. Debt collectors should not even be making collection efforts out of court if the statute of limitations has expired on the debt. If a debt collector initiates an action against you, immediately contact a debt collection attorney who can determine whether the statute of limitations has expired or not. If so, they can file a motion to dismiss the case.
Exceptions to the Statute of Limitations
Some exceptions to the statute of limitations can pause the time clock for a certain period. For example, you may have declared bankruptcy at some point. The automatic stay takes effect as soon as this happens, keeping the debt collectors from taking action. In most cases, the bankruptcy process will discharge the debt. However, there are some cases when you may be unable to get the debt discharged, and the time clock will pause for the entire time the debt collectors could not collect because of the automatic stay.
Then, the time clock may pause or stop if there is any fraud that keeps the debt collectors from discovering the existence of the debt. For example, if you consciously did something to hide the debt and throw any creditors off the path, the court can consider it an effort to conceal to keep the clock from ticking.
The court will construe any exceptions to the statute of limitations very strictly. There is a compelling reason for the statute of limitations; it is to protect you. Whoever is trying to prove that the statute of limitations should not apply will be the one who has the burden of proof to show why. The court will not necessarily give them the benefit of the doubt. It will critically examine a possible exception to the statute of limitations because they are usually expressly disfavored.
Do Not Pay Old Debt Because it Can Restart the Clock
You must be careful about what you do when debt collectors call, even when the statute of limitations has passed on your debt. Debt collectors can find a way to make you revive a debt. They may pressure you to pay a debt, knowing full well that the statute of limitations has expired. If you make some payment on the debt or you acknowledge that you owe the money, an entirely new statute of limitations may begin from that point.
Debt collectors know how this works, and they also understand that you likely do not know these rules. Thus, they may try to approach you with old debt and trap you into affirming it. This gives them significantly more time to collect on the debt.
Debt collectors use a common trick to deceive you into paying old debts. For example, they may buy an older debt and offer you a payment plan. The second you make even a partial payment on the debt, the statute of limitations begins anew. The collectors then have another four years to work on collecting money from you.
You must be cautious about what you say to debt collectors, especially when the debt is older. If you are unsure how to respond, inform the collector that you want to first consult with your debt collection attorney before taking any action on the debt.
If you face a lawsuit, contact a debt collection lawyer right away, as you have a limited time to file your answer to the lawsuit with other motions or counterclaims.
You Can File a Lawsuit Against Debt Collectors
Of course, you have a way to strike back against debt collectors when their tactics have crossed the line. Both federal and California laws give you protections as a debtor and restrict what debt collectors can do to collect.
One of your most essential safeguards is that the debt collectors cannot make false statements about collecting your debt. They cannot threaten you with criminal prosecution for failure to pay because you cannot go to jail for owing money. Debt collectors may approach you about an old debt, unleashing a cavalcade of pressure and threats to get you to pay. They know they will make large profits by persuading you to pay a debt they bought for pennies on the dollar.
Debt Collectors May Need to Pay You Money
However, you can also fight back when debt collectors break the law. You can file a lawsuit under a federal law called the Fair Debt Collection Practices Act. The law gives you the right to act as your private attorney general, and you can enforce it against the debt collectors. They can pay you the actual and non-economic losses you have suffered due to their illegal conduct.
You can also file a lawsuit against them under California law, and the state may even allow you to obtain punitive damages if the debt collector’s conduct was egregious.
Get Help from an Experienced Debt Collection Attorney Today
If you have any questions about a debt, you should get help. The Federal Trade Commission and the Consumer Financial Protection Bureau publish extensive guides with helpful information about illegal debt collection practices. You can also contact an experienced debt collection attorney to ask about the law and how to protect your rights. Your lawyer will advise whether you can file a lawsuit against the debt collectors. They may also tell you what you must do to respond to them when they have taken you to court.
You do not have to worry about how you will pay your attorney. An FDCPA attorney does not ask you to write them a check when you first hire them and will not ask for any money during your case. The lawyer works for you for nothing right up until the point when you get compensation for your case. Then, the consumer protection lawyer may get paid from the proceeds of your case. You may even get your attorney’s fees paid as part of a settlement.