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Time-Barred Debts

In May 2014, two of the nation's largest debt purchasers agreed to drop lawsuits and drop collections for roughly $16 million in unpaid debts after reaching an agreement with New York authorities. Portfolio Recovery Associates, LLC, and Sherman Financial Group, LLC, also agreed to pay a total of $475,000 in fines. The reason – lawsuits for old debts. The two companies were found to have been pursuing time-barred debts through the court system, and they knew it. New York has a six-year statute of limitations period within which to pursue legal action on written contracts.

Similarly, Florida has a five-year statute of limitations on written contracts. This means that if you have defaulted on a debt that was agreed to under a written contract (i.e. credit card debt), legal action can only be taken against you within five years thereafter. This does not mean that the debt is uncollectable; it merely means you cannot be sued. So if you have been served with a lawsuit over a debt more than five years old, it may be illegal and you have rights. Also, if you are being threatened by a debt collector that you will be sued if you do not pay off a debt that is more than five years old, this too may be deemed impermissible under various federal consumer protection laws.