It is crucial to fully understand how long a creditor has to collect on a debt. There are a series of laws in place that govern debt collection procedures including for example: the timeframes for collecting a debt, the practices and procedures for collecting a debt, and the penalties for violating these procedures. This series of laws is called the Fair Debt Collection Practices Act (“FDCPA”).
The New Jersey Fair Debt Collection Practices Act (“NJFDCPA”) fortifies the federal FDCPA and bans debt collectors from using unfair and dishonest practices. As with the federal law, the NJFDCPA guidelines apply only to debt collectors and does not apply to original lenders. The FDCPA defines a debt as any obligation of a consumer to pay money arising out of a transaction primarily for personal, family or household purposes, including money owed on a personal credit card account, an auto loan, a medical bill or mortgage. The FDCPA prohibits debt collectors from using abusive, unfair or deceptive practices when attempting to collect a debt.
Timeframes for Collecting a Debt
A statute of limitations is a statute prescribing a period of limitation for the bringing of certain kinds of legal action. In other words, the statute of limitations sets forth the timeframe in which a lawsuit must be filed. New Jersey has a statute of limitations of six years on all types of loans, including those from written contracts and credit cards. If a consumer’s debt is more than six years overdue, the lender can no longer take action in order to collect the debt. N.J.S.A. 2A:14-1. Debts such as personal loans, auto loans, mortgages and credit cards are subject to the six-year statute of limitations, which starts on the date of the breach of contract (the first missed payment). For debtors, it's important to know that you must not make any payments on debts older than six years, or the clock starts again on the statute of limitations. If you made arrangements to pay or entered into a payment agreement, that is considered activity. If the debt is sold by the original creditor to a third party, the clock on the six years does not restart.
Exceptions to the Six Year Timeframe for Collecting a Debt
There are some exceptions to the six year statute of limitations. Certain debts, such as child support and federal student loans, aren't subject to the six year statute of limitations. In addition, retail store credit cards are only subject to a four year statute of limitations. N.J.S.A. 2A:2-725; See, New Century Financial Services v. McNamara, DC-016572-12, 2014 WL 1057076 (N.J. Super. App. Div. Mar. 20, 2014) (wherein the Court ruled that a Levitz card was limited to goods and services at that store only and therefore was subject to New Jersey’s four year statute of limitations period for the sale of goods). Finally, there is a distinction when it comes to judgments. This post has so far referred to collection of a debt, pre-judgment. Once a creditor sues a debtor and obtains a judgment, the statute of limitations is different. Judgments for money damages are a lien against any real estate owned by the defendant in the State of New Jersey. N.J.S.A. 2A:16-1. R. 4:101-1. The initial duration of the lien is 20 years, but may be renewed for additional periods of 20 years. N.J.S.A. 2A:14-5.
It is important to keep in mind that the statute of limitations does not prevent debt collectors from attempting to collect on debts, the statute of limitations just prevents the creditors from being able to successfully sue on the debt. The debt doesn’t go away after six years and it is up to the defendant-debtor to claim the defense of statute of limitations and prove that the collection of the debt is indeed time-barred.
Retaining a competent attorney is critical to ensure that proper defenses are asserted. If you are not properly represented in your case the first time, you are sure to incur further fees to fix it down the road. If you are unsure of your rights, please give us a call for a free consultation. We have office locations in Wayne, Hoboken, Newark, and Hackensack.