What Creditors Should Know About Time-Barred Debt
If you are a creditor that is attempting to collect on a debt that is owed, it is essential to understand how time-barred debt could impact your ability to collect. In short, there is a statute of limitations on debt. After a specific amount of time passes (that time window is specified by the statute of limitations), a creditor no longer has the right to file a lawsuit against the debtor in order to seek the money owed. However, when a debt becomes time-barred, this does not mean that the creditor is left without any remedies. We will say more about the statute of limitations and how it affects time-barred debt, and then we will say more about other possible remedies for creditors who are owed time-barred debt.
Old Debt and the Statute of Limitations
The statute of limitations is a particular period of time that exists—a time window—in which a party can file a lawsuit or seek a legal remedy in a court of law. Statutes of limitations exist for many different legal issues, including consumer and business debt. Under South Carolina law (S.C. Code § 15-3-530), the statute of limitations for most types of consumer and business debt is three (3) years. As an article from the U.S. Federal Trade Commission (FTC) explains, the statute of limitations typically begins “ticking” once a debtor fails to make payments on the debt. More specifically, this is the time window for claims arising out of contracts, obligations, and liabilities, which tend to include most agreements between creditors and debts.
If a debtor fails to make payments to a creditor, one of the remedies the creditor has in order to seek repayment is to file a civil lawsuit against the debtor. However, this lawsuit must be filed within three years, or else the creditor is barred from filing a claim. This is what is known as “time-barred” debt. Once a debt has become time-barred, the creditor is no longer able to sue the debtor. However, other remedies may be available to creditors who are attempting to collect on time-barred debt.
Reviving Time-Barred Debt in South Carolina
One way in which creditors in South Carolina may be able to continue seeking the money they are owed is if the debt is revived. What does it mean to revive time-barred debt? First, just because a debt is time-barred does not mean that a creditor (or a debt collector, if the creditor has passed the debt onto a collection agency) cannot continue to contact the debtor in order to seek the money that is owed. To be clear, attempting to collect through contact with a debtor is not time-barred even if the possibility of filing a lawsuit is now time-barred.
When a creditor contacts a debtor about time-barred debt, the debtor may “revive” the debt. Under the South Carolina Consumer Protection Code and § 15-3-120 of the South Carolina Code, a debtor can “revive” the debt by acknowledging that it is owed in writing. The law in South Carolina also makes clear that, when a debtor decides to pay any part of the principal or interest on a debt—even if it is time-barred—that payment is equivalent to making a “promise in writing,” and as such the debt is revived. Once a debt is revived, it is no longer time-barred and the creditor may be able to file a lawsuit.
Learn More from a South Carolina Creditors’ Rights Lawyer
Creditors may have additional options to seek payment for time-barred debt, and a Columbia creditors’ rights lawyer can help. Contact Crawford & Von Keller Law Firm to learn more.