What happens to old debt? Can you still try to collect it? This question highlights one of the major differences between collecting consumer and commercial debt and one that is on the mind of creditors and NYC Debt Collection Attorneys.
Old Consumer Debt
Any attempt to collect debt from NYC consumers that is “too old” in that it is past the legal allowable time is a violation of the Fair Debt Collection Practices Act (FDCPA). Even a demand for payment (without legal action) should not be made.
Old Commercial Debt
Attempting to collect “old” commercial debt is a different story. The FDCPA does not govern collection of a commercial debt (business to business). A creditor may pursue a non-paying customer for a commercial debt despite the fact that the debt is “too old”. (This article addresses the collection of commercial debt not consumer debt).
Demand can be made to collect the monies from a customer. Savvy customers should know that they are no longer legally obligated to pay the old debt.
If legal action was brought to recover the old debt from the commercial customer, the non-paying customer would have a complete defense to the case. Further the customer could ask the Court to penalize the creditor for bringing the frivolous action.
Can you Extend the Life of the Debt?
Payments and other actions could extend the debt so that you have additional time to collect the debt. Let’s say your NYC commercial customer incurred a debt and it appears too old to collect. They made a payment towards the debt and confirmed the debt was owed and valid. This payment would extend the life of the debt and the clock would start running again.
You may be able to shop for a state that will give you the longest time to collect the debt.
Let’s say a California company does business with a NYC commercial business. In California, the law allows a creditor four years to collect for balances owed for a written contract or an account stated. In New York, the allowable time is six years. Demand could be made from anywhere since it’s a commercial account. If not paid, the California company should bring suit in New York if the debt is more than four years old but less than six years.
Do you want help collecting debt , wish to discuss credit and collection issues facing your business or want information? Contact Jocelyn Nager jnager@ffgnesqs.com, 212-686-0100 ext 12 for a free consultation.
