What is New York’s Statute of Limitations on Debt?

by | Sep 30, 2022 | Chapter 13, Bankruptcy, Chapter 7

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.

Wenarsky & Goldstein, Attorney at Law, 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.

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 two and a half 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.

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 on 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

Have you received notification of a lawsuit, or are you experiencing another debt problem? Want to know more about the New Yorks statute of limitations on debt? Contact the Law Office of Scott Goldstein.

Wenarsky & Goldstein is an experienced bankruptcy lawyer 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.


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