In Texas, the state of limitations to collect a debt is 4 years. End of Story. If a creditor fails to sue you within that time frame, you have a strong legal defense to avoid paying that debt. The proverbial clock begins to tick when “dealings in which the parties were interested together cease“ – basically you stop doing business with the creditor. The clock expires 4 years later.
In bankruptcy law, we often fight these creditors because like scavengers, they try to crowd in and pick up scraps of money – which many times they are not entitled to get – and it’s your money they want. The audacity of creditors trying to pull a “fast one” will make your mouth drop. At the Law Office of Bennett Cunningham PC we routinely object to creditors filing these legal documents – known as Proofs of Claim.
One of the worst offenders is a company called InSolve Recovery LLC (It many times has an agent acting on its behalf named American InfoSource LP). InSolve Recovery LP is located in Scottsdale, Arizona and I think the heat is warping its grasp of time and counting skills. Recently, this company filed nearly $20,000 of claims against one of my bankruptcy clients – one as high as $14,000 – and each and every one was more than 4 years old. Within 2 weeks of my office filing a flurry of objections to each of these claims, InSolve Recovery quickly filed its own withdrawals with the U.S. Bankruptcy Court. Why? Maybe because they realized that every one of the claims they made were beyond the statute of limitations. Honestly, you have to believe they know what they are doing – but they do it anyway.
Most states have laws similar to Texas – and I have included a link where you can lookup your own state’s statute of limitations on old debt.
Sec. 16.004. FOUR-YEAR LIMITATIONS PERIOD. (a) A person must bring suit on the following actions not later than four years after the day the cause of action accrues:
(1) specific performance of a contract for the conveyance of real property;
(2) penalty or damages on the penal clause of a bond to convey real property;
(4) fraud; or
(5) breach of fiduciary duty.
(b) A person must bring suit on the bond of an executor, administrator, or guardian not later than four years after the day of the death, resignation, removal, or discharge of the executor, administrator, or guardian.
(c) A person must bring suit against his partner for a settlement of partnership accounts, and must bring an action on an open or stated account, or on a mutual and current account concerning the trade of merchandise between merchants or their agents or factors, not later than four years after the day that the cause of action accrues. For purposes of this subsection, the cause of action accrues on the day that the dealings in which the parties were interested together cease.
Bennett Cunningham is a Bankruptcy Attorney licensed in Texas and is a former Investigative Reporter for the CBS Television Station in Dallas. Mr. Cunningham has garnered 7 Regional Emmy Awards, including the Best Investigative Reporter in Texas 2 years in a row, as well as several National Awards for his exposés into the mismanagement of taxpayer dollars and government waste.
This blog is not meant to give you legal advice. If you need to seek legal advice, you should consult a licensed attorney in your jurisdiction.