WHEN IS A DEBT TOO OLD TO COLLECT?

Banks, credit unions, debt buyers, finance companies, automobile dealers who finance purchases, and other lenders seeking to collect on delinquent accounts are well advised to aggressively pursue non-paying accounts soon after the accounts become delinquent. Creditor delay generally impairs the prospects for collection as debtors become more difficult to locate and key witnesses become unavailable. In addition, if a creditor waits too long to institute suit on a claim, the claim may become time barred by the applicable statute of limitations. The statute of limitations bars the filing of a lawsuit to collect the debt although it does not extinguish the debt, which still may be collected by resort to any collateral which secures the debt. See Johnson v. McNeil, 800 A.2d 702 (Me. 2002).

In Maine, the applicable statute of limitations depends upon the type of document evidencing the debt. If the debt is based on a negotiable promissory note which is signed in the presence of an attesting witness, then the statute is 20 years. 14 M.R.S. § 751; see Tornesello v. Tisdale, 2008 ME 84; 948 A.2d 1244. What constitutes a negotiable promissory note is defined by Maine’s Uniform Commercial Code. 11 M.R.S. § 3-1104. Generally, standard promissory notes prepared by lenders are negotiable instruments. If the debt arises out of an agreement for the sale of goods, such as the sale of an automobile by a dealer which finances the sale, then the statute is 4 years. 11 M.R.S. § 2-725. All other debts, including debts based on a promissory note not signed in the presence of an attesting witness, general contract claims, and claims based oral agreements, are subject to a six year statute of limitations. 14 M.R.S. § 752.

In all contract cases, the statute starts to run on the date when the contract is breached. Tornesello v. Tisdale, 2008 ME 84; 948 A.2d 1244. The contract language will generally define when a breach occurs or will set the parameters for determining when a breach has occurred.

If you are a creditor seeking to collect a debt, the attorneys of Gosselin & Dubord, P.A. can assist you. Please contact Attorney David R. Dubord at 207-783-5261, ext. 212 or drd@gosselindubord.com  for more information or for representation.