How to Fight Claims on Old Debt

In this bad economy, more and more creditors are selling off their old debt to entities called "factors," (or debt buyers) who then sue to collect. There are a lot of them out there, including New Century Financial Services (often represented by Pressler & Pressler), NCO Portfolio Management, and National Recovery Solutions. The creditor wins because they get paid money they might not have ever received, while the factor wins because they buy the debt at a discount, then go after the debtor for the full amount. However, there are flaws in this plan that may result in them not being able to collect, and you not having to pay! Here's why!

The Debt is Too Old (Statute of Limitations)

First of all, as I mentioned before, factors often buy old debt. If it is too old, you win under the Statute of Limitations. The time to bring suit in New Jersey on the breach of the terms of a credit card agreement is limited to six (6) years, while a contract strictly for the sale of goods is four (4). Therefore, if enough time has passed, without you making any payments, the creditor may not be able to collect at all.

What I recommend is that if you get a demand letter from a creditor you do not recognize, or whose name is on this list, do the following:

respond in writing within thirty (30) days of receipt demanding a verification of debt. Under federal law the factor is required to identify the original creditor.
Check to see if that original creditor is still listed on any of your three credit reports (Experian, Transunion, or Equifax). If it is not, it may be too old to report, and thus too old to sue for collection. If it is, it might still be more than six (6) years old.
Check your own records to make sure that you have not made any payments to this creditor in the past six (6) years that might reset the clock on the statute.

At the very least, if that creditor should sue you, you should file an answering pleading and assert a statute of limitations defense. If you are correct about the timing, the claim could be barred by the court!

They Can't Prove Their Case in Court

The second flaw is one that is rooted in the reality that although the factor now stands in the legal shoes of the creditor, it still isn't the creditor. In other words, they may have a legal right to bring suit for collection, but they may not have the ability to prove their case if you force them to try it before a judge. Factors usually forward the claim to an attorney for suit, knowing that in the vast majority of cases, the debtors do not file an answer, and they will win by default, and without ever having to go to court.

But what happens if you file an answer denying that you owe them anything (or at least the balance they are claiming is due)? Many times, the factor will not produce a witness at trial, either because they are out of state, the balance is too small to warrant it, or for any number of reasons. No witness, no case! Even if they do produce a witness, that person will probably not have the requisite personal knowledge to testify as to the facts necessary to prove their case or lay a proper foundation for the documents necessary to get into evidence (i.e. seen by the judge).

What Do I Do?

I recommend to people in this situation is that they contact my office for a free consultation to discuss retaining me to file an answer (asserting the statute of limitations, if appropriate), show up at trial, and demand to talk to their witness. In other words, to call their bluff! In all likelihood (although it cannot be guaranteed), they may either back down entirely, or agree to a token settlement. Either way, it is worth your effort. Just debts should be paid, but that doesn't mean that you shouldn't stand up for your rights. Sometimes, the "little guy" can win!

The Law Office of Steven J. Richardson serves New Jersey, including: Gloucester, Camden, Burlington, Salem, Cumberland and Atlantic Counties and surrounding New Jersey communities, including Woodbury, Colonial Manor, North Woodbury, Woodbury Heights, Deptford, Thorofare, Gloucester City, Washington Township, Blackwood, Brooklawn, Westville and Pitman.

Richardson Law Offices
40 Newton Avenue
Woodbury, NJ 08096
Phone: (856) 686-9910
Fax: (856) 686-9911