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Consumer Confidential: Not all debt is collectable. Be mindful of the statute of limitations

David Lazarus, Los Angeles Times on

Published in Business News

Some businesses and debt collectors may want you to think your financial obligations will trouble you forever unless you come across with some cash.

What they don't usually tell you is there are laws that limit the length of time in which you can be effectively sued for any unpaid bills.

In California, the statute of limitations for consumer debt is four years. This means a creditor can't prevail in court after four years have passed, making the debt essentially uncollectable.

But there are tricks that can restart the debt clock.

I bring this up in light of a bizarrely threatening letter from cable giant Spectrum to former customers in which the company offers to overlook past debt as long as the ex-customer agrees to resume service.

Spectrum insists that renewing service will make your old debt go away. Legal experts tell me, though, that consumers need to be careful with such offers.

 

They say that if a former customer does have past debt, and that debt is older than four years, it could once again become subject to legal action after an account is reopened and payments are resumed.

As soon as old debt is reactivated, a creditor has another four years in which to sue for payment.

"I think Spectrum would have a good legal argument that, yes, once the account returns to active status, and once money changes hands, anything outstanding on that account again becomes fair game," said Pamela Foohey, a law professor at Yeshiva University in New York.

Mary Spector, a professor of consumer law at Southern Methodist University in Dallas, reached the same conclusion.

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