QUESTION: Earlier this year, a man came to my door and gave me some papers for my husband saying he was being sued for bad debt from 2009. We live in Texas. I read online that an individual cannot be sued for a bad debt older than four years. Is this true? Should we contact an attorney? Please help.
ANSWER: Whenever one is invited to a legal proceeding, it’s best to bring someone along who knows the rules of the game. A lawyer may be expensive, but not having one may be more costly. If you go to the expense of an attorney, be sure you get one that is experienced in debt collections. Don’t bring your cousin who does real estate closings. Showing up with the second-best attorney in the room is a lot like showing up at a gunfight with the second-fastest gunfighter by your side.
If your husband received a summons to appear in court or to present documents to the court, he needs to comply. He may present the defense that the debt is past the statute of limitations to collect, if that is indeed true. In many states, debts have different statutes of limitations depending on the type of debt.
While it is true that the collector would be in violation of the Fair Debt Collection Practices Act if an attempt is made to collect a debt using the courts after the statute of limitations has expired, this fact would most likely have to be pointed out to the court. Don’t expect them to check the dates for you. Similarly, if your husband does not appear, it is likely the court may issue a default judgment to the collector for the amount of the debt.
You are lucky that you live in Texas. Certainly there are many reasons to think this, but I’m referring to Texas being known as a debtor-friendly state. In general, creditors cannot use a default judgment to garnish wages in Texas nor place a lien on real property that is a person’s homestead. But you should be aware that it can be used to levy a bank account or to seize non-exempt property.
One last word on statutes of limitations — typically the clock starts ticking from the last payment made. But any payment made before the statute runs out will reset the clock to zero and could make the debt still collectible in court.
No matter whether the old debt is past the statute of limitations, if it is a valid debt, it is still owed even if it can’t be collected in court. Should you choose to ignore the debt, collectors may continue efforts to collect the debt such as letters and calls. Regardless of the limitations’ limit, the debt will stay on his credit report for seven years from the first date of continuous delinquency. This may complicate qualifying for additional credit, renting an apartment, getting a new job or receiving the best pricing on your insurance needs.
ABOUT THE WRITER
Bankrate’s Debt Adviser, Steve Bucci, is the former president of Consumer Credit Counseling Service of Southern New England and the author of “Credit Repair Kit for Dummies.” Visit Bankrate at http://www.bankrate.com.Comment on this story
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