Creditors do not have an unlimited amount of time to sue you to collect the money. If they wait too long to do it, they'll be out of luck.
Why? Because New Jersey has a statute limitations that prevents creditors from bringing collection lawsuits after six years. The statutes exist because, after a while, memories fade and documents can get lost or destroyed. This can make it rather difficult for people to either bring a suit or defend themselves against one.
When Does the 6 Years Start to Run?
The six year starts to run from the date the creditor has the right to see you. In other words, six years from when you default on the agreement to pay the debt. This can be as early as 30 days past the due date for a payment, or six months after the last payment, and the creditor is required to charge off the debt.
The easiest way to do this is to look on your credit report where the debt appears and find the date of charge off. Has it been more than six years since that date? If so, you may have a defense against the lawsuit, should the creditor bring one.
When Does It Stop?
If the creditor brings suit and successfully gets a judgment against you within that six year period of time, then the statute of limitations is no longer an issue. I have had people call me complaining that their bank was levied upon or their wages garnished on a judgment that was more than six years old. Once suit is brought and the judgment is entered, the clock stops ticking.
The clock can also stop and start. Suppose you filed a bankruptcy, and that bankruptcy was dismissed 3 months later without a discharge. The clock stopped ticking for those three months, because the creditor was unable to bring suit against you to collect because of the automatic stay in the bankruptcy.
Then the third way the clock can stop is if the creditor simply fails to bring suit within the six year period, and the time runs out.
Creditor Sued After Statute of Limitations Ran?
So what do you do if the creditor brings a lawsuit after the statute of limitations has passed? Well, the court will not reject the lawsuit on that basis. You must file an answer asserting the statute of limitation's as a defense, and make a motion to dismiss the lawsuit. If you do not, then the creditor will succeed in getting a judgment against you!
Sometimes the creditor will try and trick you. If it has been six years since you made your last payment, chances are that the creditor sold the debt to a debt buyer, such as Midland Funding, LVNV Funding, Cavalry Portfolio, or New Century Financial. These debt buyers can try and reset the clock to the date they purchased the debt. This will not hold up if you challenge it. They can't reset the clock.
So What Do I Do?
If a creditor sues you past the statute of limitations, then you need to take action now! Doing nothing will just result in a judgment being entered against you, your bank account being levied, and/or your wages being garnished.
If the suit is for over $10,000, you realize that you need to take action and need a lawyer to assist you, and are ready to hire one, then click this link to schedule a call to discuss your case.
Want more information on how to fight back with your creditors? Then download my free book, The Biggest Secrets Your Creditors Don't Want You to Know. Become empowered and protect your rights!
Are you a visual learner rather than a reader? Do you enjoy watching YouTube to learn new things? Then check out my 3-part video series on how creditors use lawsuits in New Jersey to collect debts. Just click here for more information on how to get the links!
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