Time Barred Debt Rule

Time Barred Debt RuleHere is an article that I wrote a little while back, and had forgot about. I’m posting it now because as a bankruptcy attorney I think it is a useful Rule for debtors that have zombie debt collectors breathing down their neck.

Creditors must inform debtor if the debt is time-barred

Many people do not know this, but in December of 2010, Attorney General Gary King announced a new Rule (New Mexico Administrative Code 12.2.12) requiring debt collectors to inform creditors when a debt is so old that it is beyond the time period to sue (the statute of limitations), thus making the debt unenforceable through court proceedings. In New Mexico the statute of limitations is 6 years for a written contract (NMSA 37-1-3), 4 years for unwritten contracts and accounts (NMSA 37-1-4), or 4 years for breach of contract for the sale of goods (NMSA 55-2-725). The attorney general believes that the Rule will presumably force collectors to adjust collections policies and procedures.

The Rule essentially requires that debt collectors make a good faith attempt at determining whether the debt they are collecting is beyond the statute of limitations; this zombie or time-barred debt must be disclosed to the creditor, and the creditor must also disclose that a partial payment can revive the debt (this is more commonly known as reaffirmation). Zombie debt collectors are those collectors who hold debt beyond the statute of limitations, and try convince debtors to reaffirm the debt. Reaffirmation of the debt can happen if the debtor makes even a partial payment. Zombie debt collectors try to persuade debtors to make a small payment toward the debt. If the debtor makes a payment, the debt is reaffirmed and the debt collector can now seek action in a court of law. If you are unsure about whether your debt is time-barred you should contact a New Mexico civil lawyer or attorney in Albuquerque.

The reason a creditor must inform a debtor whether the debt is past the statute of limitations is because this information is considered material and New Mexico (Unfair Practices) law requires that material information be disclosed so debtors can make educated decisions.

It is clear that New Mexico is no longer a friendly environment for a zombie debt collector. Rules like this one are very consumer friendly, and were made to address debtors that were being taken advantage of.

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