As of March 2010, numbers released by the Federal Reserve indicated that the amount of outstanding consumer debt was approximately $2.5 trillion, which only reflected consumer debt not secured by real property, including $856 billion in credit card debt. At the same time, Fitch Ratings estimated the number of credit card defaults to be at 13 percent. In New Jersey, the statute of limitations determines how far a debt collector can go to compel payment on a delinquent debt.
New Jersey Statute of Limitations
Anyone with a credit card should be aware of the last date a payment was made on their account. Many credit card holders who have fallen behind on their payments are not sure what to do when creditors come calling. The date of last activity (also known as the date of first delinquency) determines when the clock starts ticking on your statute of limitations. The statute of limitations is the window during which a creditor can sue you for nonpayment of a debt. In New Jersey, the statute of limitations is six years for promissory notes, written contracts, oral contracts and open accounts, which is the category that credit card debt falls into.
Time-barred Debt
A debt outside the statute of limitations is known as a "time-barred debt." After the statute of limitations window closes, a debt collector no longer has the right to sue you. You still owe the debt, but you cannot be compelled by a court to pay this debt back once the statute of limitations has passed. If a debt collector attempts to sue on a time-barred debt, it is important that you show up to court and let the judge know that the debt is outside of the statute of limitations. Be aware that a debt collector can still attempt to collect on a debt outside of the statute of limitations, but he cannot threaten to sue you to collect.
Debt Re-aging
A common practice in the collections industry is debt re-aging. Re-aging happens when you take action on an old account that causes the date of last activity to change and start the statute of limitations all over again. Actions such as making a payment or even just acknowledging an old debt can cause it to re-age. Consumer advocates recommend that you do not acknowledge old debts so that you do not accidentally re-age your debt.
Statute of Limitations and Your Credit Report
The statute of limitations is not the same as how long a debt remains on your credit report. Bad debts can be outside the statute of limitations and appear on your credit report. In most cases, a delinquent debt will remain on your credit report for up to seven years after the date of last payment.
Fair Debt Collections Practices Act
The Fair Debt Collections Practices Act (FDCPA) of 1977 is a federal consumer law that spells out the rights of consumers when it comes to dealing with debt collectors. It also details what collectors can and can't do when they are attempting to collect on a delinquent debt. It is in your best interest, as a consumer, to become familiar with your rights under the FDCPA if you have any outstanding delinquent debts .
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