Until recently, New York had one of the longest statutes of limitations on debt in the United States–up to six years. However, thanks to a new law designed to protect consumers, that has changed.
Even with the new law, however, debt collectors still have a vast array of scare tactics, coercive methods, and loopholes in their toolkit to try and make you pay. In fact, they even have a few tricks up their sleeve to reset the clock on the statute of limitations.
Credit lawyers in New York City and across the state aren’t giving up the fight though, and are taking it to the collections agencies any chance they get.
How Do Statutes of Limitation Work?
In criminal law, the statute of limitations refers to how long a state has until they can no longer charge you with a crime. In civil and financial law, it refers to how long a debt collector may wait before taking legal action against you.
A collection agency can indeed sue you, and a successful lawsuit against you can have terrible consequences. You may have your wages garnished, your bank accounts seized, and liens placed on your property.
That being said, if a debt is past the statute of limitations, it may still show up on a credit report and continue bringing down your score
What Does the New Law Say?
The Consumer Credit Fairness Act of 2021, which took effect in April of 2022, has reduced the statute of limitations from six years to three years. This means creditors only have three years to file a lawsuit against you. Typically, the clock starts ticking when you made the last payment on the debt, but this isn’t the end of the story.
Clock Reset Clauses
While we wish there were no way for the clock to reset, the reality is different. Theoretically, it can go on indefinitely if you keep hitting the reset button, and there are many ways that can happen. Some of these involve a debt collector tricking you into resetting your own clock.
It all comes down to acknowledging the debt. Here are some ways that can happen:
Making a New Charge on the Same Account
If you have a credit card that is long past due and use it to buy something, it resets the clock. By incurring additional debt, it is assumed that you are taking responsibility for all of the debt.
Making a Payment
Many people have been coerced into making a partial payment to stop collectors from calling them. Even a single dollar paid against a debt is considered acknowledging the debt, and the clock goes back to zero.
Accepting a Settlement Offer
Some agencies will offer you a steep discount of up to 50% or more to accept a settlement. This offer tempts many people, and yet again causes the clock to reset.
Credit Repair to the Rescue
It’s important to be aware of statutes of limitations on debt, but sometimes, it’s not enough. Licensed credit repair companies are experts in the world of debt collectors, credit reporting agencies, and the legal system–they have years of experience fighting predatory collection agencies and lenders, and they can assist you in disputing erroneous, false, or inaccurate debts.
Once a dispute is successful, the lawyers at credit repair companies like The Phenix Group can petition the credit reporting bureaus to remove these debts from your credit report. Taking these pressures off of your credit profile provides immense benefits in the form of approved loans, lower interest rates, and even lower car insurance premiums!