Old Debt in Maryland
I’ve worked for both debtors and creditors in trying to resolve old debt. This week I want to take a look at the rights of both parties when the debt is very old.
In Maryland, the statute of limitations for lawsuits is generally three years. Md. Code, Cts & Jud Proc, 5-101. That means that the plaintiff must file suit against the defendant within three years after the date that the debt accrues. In cases of intentional torts, the statute of limitations is one year. If the debt is for a promissory note or a contract which is “under seal," the statute of limitations is twelve years. Md. Code, Cts & Jud Proc, 5-102.
A judgment is the court’s decree, after a trial, that one party owes another party money. It’s what allows for garnishments, etc. A judgment accrues interest at 10% annually and it is valid in Maryland for twelve years. If a judgment has not been collected within twelve years, the creditor needs to renew it or else it will expire, along with the creditor’s claim. District Court judgments can be renewed by completing Form DC/CV 23 before twelve years has expired from the date when the judgment was entered. If a creditor files for a garnishment to collect on an expired judgment, the debtor should file an objection with the court.
If the creditor writes off the debt, it can still try to collect by collections or by suit. The debtor is still liable. If the debt is written off or charged off (normally around 120-150 days after delinquency), it is turned over to a collections department within the company, or else sold or assigned to a third party collection agency. FDCPA rules limit the actions of third party collection agencies, but the borrower can still be sued.
Collection agencies often hold these accounts for years, and sell them to other collection agencies. The collection agencies will make phone calls and send letters. They may file suit against the borrower. So-called “scavenger" agencies are the last in the cycle. They will buy old debts, even if the statute of limitations has expired. They can make their profit because they pay only pennies on the dollar.
How long does old debt stay on a borrower’s credit report? The Fair Credit Reporting Act prohibits credit reporting agencies from listing most nongovernmental debts more than seven years past the date of first delinquency.
More information on the statute of limitations in Maryland: http://www.expertlaw.com/library/limitations_by_state/Maryland.html http://research.lawyers.com/Maryland/Maryland-Statutes-of-Limitations.html
More information on written off, charged off debt: