Debt collection activity is subject to state law, including the laws governing the filing of a lawsuit when the creditor uses the court system to enforce the debt. An important law affecting the viability of a lawsuit to enforce debt is the statute of limitations. This law sets a deadline for filing the lawsuit. If the creditor misses the deadline, the debtor can prevail in the lawsuit. Maryland law generally gives creditors three years to file a lawsuit to enforce a debt.
Three-Year Statute
Maryland Code Section 5-101 states that a civil action must be filed within three years after it accrues. This is a general statute of limitation that applies to a debt, unless there is a more specific statute that applies to a particular debt. Debts based on contract, both written and oral, as well as debts based on open accounts, such as credit cards, are subject to the three-year limitation period.
Twelve-Year Statute
A special twelve-year statute of limitations applies to debts specified in Maryland Code Section 5-102. Included in the statute are debts based on promissory notes, most bonds, court judgments and contracts or other written instruments made "under seal." What constitutes "under seal" depends on the circumstances, but Maryland case law indicates it can be as simple as including the phrase "signed and sealed" near the debtor's signature. Debtors should be wary of such phrasing in a written instrument because of the impact it may have on lengthening the statute of limitations.
Defending a Lawsuit
A creditor can file a lawsuit on a debt even though the statute of limitations has expired. The law does not state that the debt is automatically voided, nor is there any way for the court to know that the statute expired. The debtor is responsible for bringing the statute of limitations issue to the court's attention. This is done by responding to the lawsuit and asserting the statute as an affirmative defense.
Reaffirmed Debt
Creditors and debt collectors are not legally prohibited from contacting a debtor about an expired debt. If a debtor reaffirms an expired debt, the statute of limitations begins again. This occurs when a partial payment is made or the validity of the debt is acknowledged in writing after the statute has already expired. If the statute has not yet expired, it will restart from the date of the payment or acknowledgment.
0 comments:
Post a Comment