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January 6, 2022 Collections

What Can Restart the Debt Collection Statute of Limitations for NJ Businesses?

NJ Debt Collection Statute of Limitations Restarted

Cash flow is the lifeblood of a business. Companies need to be able to collect on unpaid debts in order to cover their own costs. By law, consumer debts are time-limited. After a certain amount of time has passed, a debt falls outside of the New Jersey statute of limitations—meaning it is technically no longer collectible under state law. 

That being said, there are certain consumer actions that can restart the statute of limitations. In this article, our New Jersey collection lawyers provide an overview of the statute of limitations for debt collection and highlight three consumer actions that can bring an old debt “back to life” to allow a business to once again pursue compensation. 

New Jersey Debt Collection Statute of Limitations

The statute of limitations for collecting upon debt in New Jersey depends, in part, on the type of debt that a business is trying to recover. Most consumer debts in our state are subject to a six-year statute of limitations. However, there are some exceptions to the rule. For example, the statute of limitations for a bounced/dishonored check in New Jersey is only three years. 

Still, most business and consumer debts, including unpaid invoices, are governed by a six-year statute of limitations. Under New Jersey law (N.J.S.A. 2A: 14-1), any legal action to recover these types of debts “shall be commenced within 6 years next after the cause of any such action shall have accrued.” 

To be clear, that does not mean that all debts must be completely settled within six years of the date of the original loan/credit. The keyword is that businesses have six years to collect on their outstanding debt from the date when the action “accrues”—and that date can actually change based on the actions of a consumer. 

Three Consumer Actions that Can Revive an Old Debt

1. Acknowledging the Debt and Agreeing to Pay it

In New Jersey, debt begins to accrue when a consumer acknowledges the validity of the debt. For example, the date that a consumer receives a service from a business (without making full payment) is the first date when debt begins to accrue. At that time, the six-year statute of limitations clock begins to run. From there, the debt collection statute of limitations clock re-starts any time the debtor actively acknowledges the validity of the debt and agrees to make payments. 

2. Making a Payment on the Debt

New Jersey’s debt collection statute of limitations clock will also reset if a consumer/business makes a payment on a debt. With every payment, the action begins to accrue once again—meaning the six years statute of limitations debt collection clock restarts each time a payment is made. For example, imagine that a consumer owes $10,000 to a Morris County business for residential contracting services. They agree to pay $300 per month to resolve the debt. If the consumer makes payments for an entire year and then suddenly stops, the business will have six years from the date of the last payments to collect on the debt. If another year passes by and the consumer finally makes an additional payment, then the statute of limitations clock resets. The business once again has six years to collect on the outstanding debt. 

3. Adding a New Charge to the Same Account

Finally, a business or consumer in New Jersey can revive an old debt by making a new charge on the same account. While this is somewhat less common, it is an issue in some cases. As an example, imagine that a New Jersey resident has a credit card with a $5,000 limit. They charge up to $1,500 and then stop making payments for an entire year. If they suddenly make another charge on the account, the statute of limitations clock resets. The credit card company would once again have six years to collect on the debt. 

Respected New Jersey Debt Collection Attorneys

At Snellings Law LLC, our New Jersey debt collection lawyers are knowledgeable, solutions-focused advocates for clients. If you have any questions about the consumer actions that restart the debt collection process, we can help. Call us now or connect with us online for a fully confidential initial consultation. With a main office in Parsippany, we provide debt collection representation throughout the region, including Morris County, Essex County, Bergen County, Sussex County, Passaic County, Union County, and Somerset County.