What Is the Statute of Limitations on Debt?
Failing to pay a debt does more than shred your credit report. You can also be sued by your lender. New York, like other states, gives lenders or debt collectors a limited amount of time to bring a lawsuit. This deadline is set out in the New York Statute of Limitations, found in Article 2 of the New York Civil Practice Law and Rules (CPLR). If the deadline has passed, then you can get a lawsuit dismissed and not have to worry about the debt.
Law Offices of Wenarsky and Goldstein, LLC carefully review whether the statute of limitations period has expired. New York has recently revised its statute of limitations, and we review the highlights below.
Creditors Have Three Years to File a Lawsuit
New York has recently updated its statute of limitations for consumer debt. Previously, the statute of limitations was six years. Today, the period is three years. Once three years have passed, a creditor/lender cannot win a lawsuit for an unpaid debt in New York court.
This three-year limit is part of a law that was enacted in April 2022. The law was called the New York Consumer Credit Fairness Act (CCFA). Consumer credit generally means credit extended to consumers rather than businesses. Consumer credit transactions can involve different types of debt like personal loans, credit card debt, and car loans.
Hospitals or healthcare facilities also have three years from the date of treatment to file a debt lawsuit to collect on medical debt.
The change in the statute of limitations will help countless New York debtors, but not all debt is impacted. For example, if you have unpaid family obligations, like child support or alimony, then you can still be sued. These debts are created by court order, not by contract. To enforce alimony or child support, a lawsuit has to be brought within 20 years.
New York has other statutes of limitations for different cases and situations. For example, those who want to collect damages for dental, podiatric, or medical malpractice have to know that the statute of limitations is also three years. On the other hand, if residential tenants want to file a lawsuit to recover overcharges on rent by a landlord, there is no statute of limitations.
Creditors Can Still Try to Collect on the Debt
Filing a lawsuit isn’t the only way to collect on a debt. Creditors can use other collection methods, such as calling you and trying to convince you to pay or foreclosing on collateral. Even if the statute of limitations has expired, a creditor can still use non-litigation methods.
However, debt collection laws in New York prohibit creditors from threatening to collect more than the debtor owes, communicating in a way that makes them believe debt collections are authorized by a governmental entity, or contacting them or their family members too frequently since such behaviors can constitute debt collection harassment.
Every debt collector must follow New York state and federal laws. These laws limit what debt collectors can and can’t do in different debt collection cases. Along with the CCFA, the Fair Debt Collection Practices Act (FDCPA) is the main federal law governing third-party debt collection practices and offering protection to debtors.
For example, under the CCFA, original creditors and debt collectors have to notify the court when filing debt-collection lawsuits. The clerk of court will notify the debtor so they have enough time to dispute the debt.
Creditors sometimes use debt collection agencies to help them collect overdue debts. However, under the CCFA, debt buyers and collection agencies have to prove they own the debt and have a right to sue the debtor to collect it.
There’s more good news. Under the old law, if you made a payment on an old debt, the clock started all over again. Your debt could have been 10 years old—well outside the old limitation period (which used to be 6 years). But because you made a new payment, the debt was “re-aged” and the lender could sue.
The state’s Consumer Credit Fairness Act has changed that. Now a payment on an old debt doesn’t make the debt new again. It will still fall outside the limitation period. Still, you aren’t obligated to pay—and there really isn’t any reason to, unless you are afraid of other collection methods.
You Shouldn’t Ignore the Lawsuit
Let’s say three years have passed since you stopped paying a debt. Can you just ignore a lawsuit filed against you? No! Typically, it’s up to the defendant to tell the judge that the statute of limitations period has expired. You would be foolish to count on the creditor suing you to disclose that fact in court. Unfortunately, the judge might not figure that out on their own, either.
If you don’t respond to a lawsuit, you are vulnerable to a default judgment entered against you. This means you lose the case simply because you failed to respond.
We strongly recommend contacting an attorney if you’ve been sued for an unpaid debt. We can analyze what steps to take next, including possibly responding to the lawsuit.
Unpaid Debts Take 7 Years to Fall Off a Credit Report
So a creditor can’t sue you after three years for an unpaid debt. But what about your credit report? Most people realize that having derogatory information, like an account in collections, will hurt their credit score. It will be much harder to secure new credit, and if you do, your interest rates will be much higher.
New York’s law doesn’t really change how most negative information gets reported to credit bureaus.
If you have charge-offs or an account in collections, it will fall off your report in 7 years. That timeline has not changed because New York passed a new debt collection law. Although a creditor can’t sue you, they can still report the negative information to the credit bureaus, hurting your credit.
There are ways to mitigate negative information on a credit report. Timely, recent payments and reducing your debt levels with help.
Is a Creditor Suing You for an Old Debt? Contact Us
The Statute of Limitations for debts means debt collectors or creditors have three years to sue or try to collect on an unpaid debt. After the time has expired, that debt is considered time-barred. Although creditors can still sue for time-barred debt, you may be able to raise the statute of limitations as a defense in your debt collection case.
Have you received notification of a lawsuit, or are you experiencing another debt problem? Want to know more about the New York’s statute of limitations on debt? Contact the Law Offices of Wenarsky and Goldstein, LLC.
New Yorkers should know their rights, regardless of whether the Statute of Limitations on their debts work in their favor or against them.
Law Offices of Wenarsky and Goldstein, LLC are experienced bankruptcy lawyers helping those with debt problems. If you’ve received notification of a lawsuit, contact him right away. He can review whether the creditor can even sue and will identify the path forward that protects your legal rights. You can schedule a consultation by calling his office. Banks and other lenders have large law firms working for them—you need someone in your own corner.
Frequently Asked Questions About New York’s Debt Statute of Limitations
Does Making A Partial Payment Restart The Statute Of Limitations Clock In New York?
No. Under the Consumer Credit Fairness Act, making a partial payment on old debt no longer restarts the three-year statute of limitations clock in New York. This significant change protects New York consumers from debt collectors who previously encouraged small payments specifically to reset the time limit and extend their ability to sue.
What Information Must Debt Buyers Provide When Filing A Debt Collection Lawsuit?
The CCFA requires debt buyers to provide substantial documentation when filing debt collection lawsuits, including the original contract or agreement containing the debtor’s signature, a chain of ownership from the original creditor, an itemized accounting with the last four digits of the account number, and the date of the last payment.
Do Different Types Of Debt Have Different Statutes Of Limitations In New York?
Yes. While most consumer debts (credit card debt, personal loans, medical debt) now have a three-year statute of limitations, other debt types follow different rules. For example, mortgage debt has a six-year limit, while child support collection can be pursued for up to 20 years in New York State.
Can Debt Collectors Still Contact Me About Time-barred Debt?
Yes. Even when debt is time-barred, debt collectors can still contact you and request payment, though they cannot legally sue you or threaten legal action. Under federal and New York law, they must inform you that the debt is time-barred if they know or should know the statute of limitations has expired.
What Should I Do If I’m Sued For A Debt Outside The Statute Of Limitations?
Never ignore the lawsuit. File an answer with the court immediately asserting the statute of limitations defense. Consult with a debt relief attorney who can help you prepare documentation showing when the debt became delinquent and confirm the three-year period has indeed expired.
