Texas Laws Against Aggressive Debt Collection
When it comes to debt collection, consumers have a variety of options to protect themselves against unlawful debt collectors. A 2019 law in Texas strengthened the rights of consumers against debt collection and maintained the state’s short statute of limitations. A Texas statute of limitations on debt is the amount of time a company or person has to pursue legal action against another. If enough time has passed, then the statute of limitations means that companies can no longer sue people for their debts. Luckily, Texas has laws on the books to protect people against debt and the laws are in the favor of the consumer. With the help of an attorney, there are ways to overcome these lawsuits and defeat the creditors.
When people receive letters or summons in the mail about an old unpaid debt, it can inspire fear and panic. A person in debt may still be in a position where they are unable to resolve the debt and the collection attempts can bring up trauma. In the case of old debts, or what some people call zombie debts because of how debt collectors never ceased to collect on them, companies can still aggressively attempt to collect on the debt. However, as a response to this, many states like Texas implement a statute of limitations to protect citizens who cannot pay or do not want to pay the debt collector.
What is the Texas Statue of Limitations?
The Statute of Limitations is a Texas law that states that if you owe unpaid debt such as credit card debt or consumer debt, the collector only has four years to bring a debt collection lawsuit against you. Bringing a Debt Lawsuit in a Texas Court is the debtor collector’s strongest method for collecting. So removing this option for the creditor is significant.
This Texas law is governed by Section 16.004 of the Texas Civil Practice and Remedies Code. When you have a credit card, you have a contract with the credit card company where you promise to pay the credit card company. A written contract is not required. So if you stop paying the credit card, the credit card company can file a lawsuit against you to collect the debt under the theory of breach of contract. However, if the debt collector does not file a lawsuit within four years of the breach of contract, then they cannot file the lawsuit to collect the debt. This debt is now known as time-barred debt. If the creditor files a lawsuit against you after the four years, they are violating the Texas Debt Collection Law, and you can initiate retaliatory legal action, and have a strong case for getting the lawsuit dismissed.
What Is Time Barred Debt?
Time-barred debt is debt that cannot be collected through legal action anymore due to the expiration of the 4-year statute of limitations. The creditor can still attempt to collect the debt and report it on your credit report, but they can not bring a lawsuit against you and so they can not obtain a Judgement against you either.
The company can no longer threaten to sue you and forcibly collect the old debt through a lawsuit before you can organize your finances. In essence, the bank cannot force you to settle the debt before you are ready and cannot drag an individual into court when it is clear the individual cannot pay.
Avoiding Illegal Collection Restarts
It is also important to remember that this 2019 law also included a Section that introduced the idea of time-barred debt. Once the statute of limitations has passed on the debt in Texas, then collectors cannot chase consumers for it. The old debts are considered time-barred, which means that they are off-limits. In some states, companies abuse their consumers by frightening the individuals into promising to pay their debts or even acknowledging the debts. This is a trick to allow the company the right to restart the clock on collections and continue harassing the person into payment. They call this zombie debt.
Luckily, Texas law contains provisions that outlaw companies from restarting the debt. Even if you attempt to pay the debt at one time, they can no longer threaten you with legal action. Although you may still owe the debt on the books unless you file for bankruptcy or settle with the company, they lose their most powerful weapon of intimidation thanks to powerful Texas laws that protect vulnerable consumers.
How Do You Calculate The Statute Of Limitations?
The statute of limitations is four years since the date of the breach of the contract. So when does this breach actually happen? As a rule of thumb, the date of breach is about 30 days after the last time you paid the debt.
To illustrate this, let’s say you have a credit card bill where the minimum payment is due on the first day of each month. You pay your September 1 minimum payment and you are current on your credit card bill. Then you do not make your October 1 and all future subsequent payments. Your last payment was September 1, but you did not breach your contract until at least October 1 when you missed your first credit card payment. So if a client presented these facts to me, I would advise them that the statute of limitations clock did not start counting until at least October 2. When it is a close call like this, you should really get your ducks in a row by pulling your credit report and reviewing it to determine your last payment.
Going into debt itself can be one of the most difficult things about adult life. If you find yourself facing a lawsuit or experiencing harassment over a debt that could potentially be barred by the statute of limitations, please don’t hesitate to reach out to our law office. We’re here to assist individuals facing financial difficulties. Our team can support you by actively challenging your creditors, exploring potential settlements, or providing guidance on the bankruptcy process. Rest assured, we’re dedicated to finding the right solution for your specific situation, and we’re here to help you in your fight against creditors.