If you owe money to a person or an entity, you owe a debt. The person or entity that is owed the money is called a creditor and you are called a debtor. Creditors naturally expect to get paid. How they go about collecting the debt is governed by federal and state law. The following is a series of questions and answers involving collection of debt in Maryland.
Is there any time limit on collection of debts?
Yes. There are time limits governing when a creditor can sue you for a debt. These laws are called statute of limitations. In Maryland, the statute of limitations requires that a law suit be filed within 3 years for written contracts, and 3 years for open accounts, such as credit cards. For credit card debt it means the date of the last activity on the account or the date the account was written off as a bad debt was at least 3 years ago. This means that if your account is older than 3 years you can raise the statute of limitations as a defense to the complaint. However, the statute of limitations only covers the right of the creditor to sue you in court. It does not restrict the creditor from reporting the debt to the credit reporting agencies or contacting you to collect the debt. Once a judgment is entered against you, the creditor has 12 years to collect it. Of course if you file for bankruptcy and receive a discharge, the creditor may not take any action against you personally to collect on the debt even if a judgment was entered (unless the creditor is owed child support, or the debt involves a student loan, or other non-dischargeable debts).
What happens if you are sued and the statute of limitations has expired?
Unless you raise the defense that the statute of limitations has expired, the court will not know that it has expired and may rule in favor of the creditor. It is therefore critical that you answer the complaint and raise the issue. You will need to show the judge that the statute of limitations has expired. You can do this by showing a copy of the debt on your credit report, which should show the date of the last activity or the date the debt was charged off. The creditor will then have to prove to the court that it has not expired.
What can I do to stop a debt collector from calling and harassing me for payment?
There are both federal and state restrictions on debt collectors. The federal law is known as The Fair Debt Collection Practices Act. It places restrictions on how debt collector and/or attorneys go about contacting a debtor to collect the debt. For example, they may not call you on the telephone before 8 a.m. or after 9 p.m. unless you have told them it was OK to call you at other times. They may not contact you at work if they know that your employer does not want you to accept personal calls at work. If you are contacted by a debt collector, do not admit that you owe the money or make arrangements to pay the debt if you believe the statute of limitations bars the creditor from filing suit. If you do admit the debt or make arrangements to pay, you may have just extended the statute of limitations for another 3 years. If you do not want a debt collector to call you at any time, you should first tell them on the phone to stop calling and then follow up that phone conversation with a letter that you send them by certified mail, return receipt requested. If they contact you after receiving your certified letter, you may now have a claim against them for violating the Fair Debt Collection Practices Act.
The Maryland law governing debt collection can be found in the Annotated Code of Maryland, Commercial Law 14-202. It contains many restrictions including, prohibiting: a debt collector from using or threatening to use force or violence to collect the debt; to threaten criminal prosecution, unless the debtor has violated a criminal statute; disclose or threaten to disclose information which affects the debtors reputation for credit worthiness with knowledge that the information is false; contacting the debtors employer; communicating with the debtor or a person related to him with the frequency, at unusual hours, or in any other manner that would be reasonably considered abuse or harassment; use obscene or grossly abusive language.
Are there any limitations on how much a creditor can collect after judgment has been entered?
After a judgment has been entered against a debtor, the creditor has the legal right to garnish wages and/or bank accounts or attach any other asset to collect the debt. While a creditor may not garnish more than 25% of the debtors wages per pay period, there are no such limitations on how much a creditor may garnish from a bank account or other asset. However, the debtor may claim certain assets exempt from garnishment. The exemptions from garnishment can be found in The Maryland Annotated Code, Courts and Judicial Proceedings 11-504. These include $6,000.00 in cash, in a bank account or in property of any kind whose value is $6,000; an additional $1,000 in household furnishings, household goods, clothing or other property used for household purposes for the debtor or a dependent of the debtor; an additional $5,000 in real property or other personal property. Once a garnishment other than wages is entered, the debtor generally has 30 days to file a motion with the court to claim the property garnished as exempt under Maryland law.