California Statute of Limitations for Contracts

What is California's statute of limitations for collecting a debt?

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Bill's Answer: Answered by Mark Cappel

Statutes of limitations for debt are often misunderstood. It is common for people to mix together the timelines for charging off a debt, the credit report reporting period for delinquent debt, and a state’s statute of limitations into one concept. My answer here will describe each of these, with a focus on California’s statute of limitations rules. Let us start with the statute of limitations.

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Statute of Limitations For Debt in General

When a borrower fails to repay a debt, this is considered a breach of contract. A contract can be written or spoken. A breach of contract may give the harmed party a cause of action, which is a legal reason to file a lawsuit against the other party.

A statute of limitations for contract breach is, at its heart, a state's policy decision. It is an attempt by the state legislature to set the amount of time people and organizations in that state have to use the courts to resolve contract breaches. Some legislatures like Ohio set long statutes of limitations, and others like California, set short limits.

A statute of limitations for debt is an affirmative defense a defendant can use if the time for filing an action (a lawsuit) has exceeded what the state allows. In all but a few states, the passing of a statute of limitations does not prevent a plaintiff (a collection agent or original creditor) from filing an action. If the statute of limitations has passed, the defendant (the debtor or consumer) must raise this defense before the conclusion of the trial. The court will dismiss the case if it accepts the statute of limitations defense.

A statute of limitations for debt does not:

  • Prevent the filing of a lawsuit (in most states)
  • Set how long a debt can appear on a credit report
  • Allow you to ignore a court’s summons
  • Bar collection agents from attempting to collect the debt (except in Wisconsin and Mississippi)

If you determine your state’s statute of limitations for breach of contract has passed, the likelihood of the creditor attempting to file an action to enforce the debt is low. A creditor filing an action indicates either he or she believes the statute of limitations has not expired, or he or she believes the defendant will not raise this defense.

Fact Wisconsin and Mississippi outlaw lawsuits against consumers in cases where those state statutes of limitation have passed. Wisconsin and Mississippi are the only exceptions to the “lawsuits are allowed for original creditors even if the statute of limitations expired” rule.

California Statute of Limitation for a Contract

According to California Code of Civil Procedure § 337(1), the statute of limitations for a written contract is four years. Under § 339(1), the limit for an oral contract is two years. See the resource Collection Laws and the Statute of Limitations for the rules in other states. See also How to Tell Which Statute of Limitations Applies to Your Situation.

The California statute of limitations does not apply to an original creditor or collection agent telephoning or sending letters in an attempt to collect a debt. Under California law, the expiration the statute of limitations clock does not mean an original creditor cannot file an action. (The opposite is true for collection agents.) The statute of limitations clock running out does not prevent original creditors or collection agents from calling or sending you letters to try to collect the debt. In California, the statute of limitations is a defense used in a trial only.

Wise Advice Collection agents violate the FDCPA if they file a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987) and Basile v. Blatt, Hasenmiller, Liebsker & Moore LLC, 632 F. Supp. 2d 842, 845 (2009)). Unscrupulous collection agents sue in hopes the consumer will not know this rule.

California courts allow contracting parties to modify the length of the otherwise applicable California statute of limitations, whether the contract has extended or shortened the limitations period. Extending the length must take place at the time of contract, and cannot be done retroactively.

Clock Starting & Stopping

When does the clock on a statute of limitations for a contract begin to run? In earlier versions of this answer, my writing was unclear on this subject. Under California CCP § 312, “Civil actions, without exception, can only be commenced within the periods prescribed in this title, after the cause of action shall have accrued, unless where, in special cases, a different limitation is prescribed by statute.” What does this mean?

Courts interpret and refine vague statutes. A 1992 case, Spear v. Cal. State Automobile Ass’n, is a recent decision on this matter. The California Supreme Court decided, “A contract cause of action does not accrue until the contract has been breached.” In the 1996 case Angeles Chem. Co. v. Spencer & Jones, the same court decided, “The claim accrues when the plaintiff discovers, or could have discovered through reasonable diligence, the injury and its cause.”

These cases mean that in California, the clock starts when the moment the borrower defaults on their payments. If, for example, a payment is due on June 1 and it does not arrive by that date, the statute of limitations clock starts running on June 2. Similarly, if a payment of — for the sake of argument — $100 is due on July 1 and the borrower pays less than $100, the borrower is in breach of contract at that point.

Tolling & Statutes of Limitations

Tolling stops the statute of limitations clock. These events can toll a statute of limitations in California:

  • Defendant absent from the state (CCP § 351)
  • The plaintiff was a minor (CCP § 352(a); Family Code § 6500 and 7050(e)(4))
  • Plaintiff was mentally disabled or incompetent (CCP § 352(a))
  • Plaintiff was incarcerated in prison (CCP § 352.1(a))
  • The defendant has a restitution order in place (CCP § 352.5)
  • The plaintiff or defendant die (CCP § 366.1 and 366.2)
  • State Bar takes over the attorney’s law practice (CCP § 353.1 )
  • War prevents access to the court (CCP § 354)
  • Bankruptcy, injunction or statutory prohibition (CCP § 356)
  • Voluntary agreement between the parties (CCP § 360.5)
  • Defendant’s felony conviction (CCP § 340.3(a))
  • Military service (50 U.S.C. App. § 526)
  • Delayed discovery, when plaintiff suspects or should have suspected injury
  • Various equitable tolling circumstances, including impossibility due to circumstances, interference, fraud and so on

Consult with an attorney licensed to practice in California to discuss the specifics of your situation and to help you determine if tolling applies.

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Credit Report, Charge-Off & Statute of Limitations

The amount of time that derogatory comment on an account in a credit report is set by federal law called the Fair Credit Reporting Act. The federal credit report rules and the California civil procedure rules regarding the statutes of limitations have only one tiny connection: The length of time a judgment may appear on a credit credit report is either 7 years or the life of the judgment, whichever is longer. A California judgment is valid for 10 years, and can be renewed. Therefore, a California judgment will appear on a person's credit report for 10 years.

See the resource Charge-Off & Credit Report to learn more about the relationship between statutes of limitations and credit reports.

Your Question

You mentioned you reside in California, your last payment was due in 2003, and you received a summons from a lawyer. You also mentioned copies of your credit reports. Be sure to check in with providers of debt consolidation in California such as this linked provider to get an evaluation.

Review your credit reports to see if the date of first delinquency is mentioned. If you stopped making payments and never restarted, this date of first delinquency is clue to the date of contract breach. Ignore the charge-off and first reported dates, as those are not significant for learning your date of breach. It is likely the statute of limitations has run its course, unless you fit into one of the tolling exceptions listed above. However, as we discuss above, a California plaintiff is not barred from filing an action if the statute of limitations has expired. Consult with a California lawyer who has civil litigation or consumer law experience to discuss how to file an answer that includes a motion for dismissal based on a statute of limitations defense.

For more information about negotiating with your creditors, visit our debt settlement information page.

For further information regarding options available to consumers struggling with debt, I invite you to visit the debt help resources page. I hope the information I have provided will help you Find. Learn. Save.



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Comments (340)

Jr 9 A.
Azusa, CA  |  April 23, 2014
What is the rule for online loan places? What is the statue of limitations? I have an agency trying to collect an old loan that was paid years ago. The online loan company has no record of my loan. They have changed names. Please help.
April 23, 2014
No easy answer to this type of question. Read the article Which Statute of Limitations Applies to Your Situation? to learn the steps to analyze a question like yours.

I suggest you send the collection agent a debt validation letter immediately. The collection agent may not collect the debt if it cannot validate it. If, as you mentioned, the original creditor no longer exists or no longer has a record of the debt, then it is unlikely the collection agent will be able to validate the debt. It is worth your time to request a debt validation.
John C.
Bridgewater, CT  |  April 21, 2014
While operating in California in 2009, my business partner and I took out a loan, payments to start in Jan 2010. Due to numerous issues including the creditor's own circumstances, the payment schedule was never setup. The creditor has appreciated tax benefits since, but not actual payments toward the loan were made. He's now asking for full repayment plus interest. I believe the CA SOL would apply, however while my business partner remains in California, I relocated to Connecticut 3 years ago. Did the SOL clock 'freeze' when I moved across the country? Thank you.
April 22, 2014
John, you ask a good question. I recommend you speak with an attorney, as there are relevant details you did not mention. For example, is your business a corporation?

A lawyer will advise you which SOL applies; the CA 4-year, the CT 6-year, or some other state's statute of limitation. You may be able to argue there should be no tolling of the SOL, due to the fact your partner was and is present in California. However, my analysis is very superficial, and you need a deeper review of the facts to learn your rights and liabilities.
George H.
El Cajon, CA  |  April 19, 2014
My father died in 2009 after a battle with cancer. He left the estate with over $300k in medical bills. He signed over the house to me when he went into the hospital. I called the debt collections in 2009 trying to work something out as I had a little money and didn't want to lose the house. As it's all I have from him. He had a little over $100k in the bank, meaning I had to probate. After talking with the debt companies trying to work something out I was asked for $10K as a down payment good faith that I gave and $100 a month after that until probate was finished. I agreed over the phone. Then I was told would be 10% interest a month on the debt, and that if probate wasn't finished in a year they would probate or sue me. They have done neither. During that 1st month I figured to just let them probate it or sue me. Why bother? I felt I was stuck under a rock I wouldn't be able to lift. They have done neither. I finally went ahead and started probate. The lawyer told me they will probably sue me now. Thanks to your Web siteI found about the 4-year SOL clause here in California. Can my actions be consider tolling or have an affect on Calif. CCP § 366.3?
April 21, 2014
I am hesitant to offer an opinion here because you're asking for an interpretation of the statute of limitations found in California's probate code, an area of law where I am not qualified to offer useful thought. Sit down and review Calif. CCP § 366.3 with your probate lawyer. It's a concise piece of law. Ask him or her about the case law interpreting this statute.
Dan W.
Santa Clarita, CA  |  April 01, 2014
I'm writing to see what you recommend in this situation. I had a credit card that went to collections back in 2006 and I was in a position at that time where I started making full payments on the credit card but after a while, I ran into some major financial issues via a costly divorce and support payments. In 2009 I received help from an attorney to help with debt settlement and took care of all debt minus the credit card mentioned above. I still receive letters from "multiple" collection agencies regarding this one account and have supplied other collection agencies with my attorney's name, address, phone number and I'm wanting to know (1) Do I have to keep supplying this information (2) Isn't there some kind of time frame for collecting this debt (3) If I don't have the funds to pay this off even if they cut it down by 50%, what are my options. Bankruptcy is not an option primarily after addressing all the other debt settlement. Currently I'm faced with an outsourced industry, work is almost non-existent and I'm faced with transitioning into another industry. What that is, remains to be seen.
April 03, 2014
Am I correct in assuming the last payment on the account in question was in 2009 or before, and that you reside in California? If both of my assumptions are correct, then you're in for a game of Whack-A-Mole with collection agents.

In California, the statute of limitations that applies to delinquent credit card debt is 4 years. If the California statute of limitations applies to this account, and there's no tolling that applies, then the statute of limitations clock ran out on this account. It is possible for a collection agent to file a lawsuit on time-barred debt, but doing so violates the Fair Debt Collection Practices Act. Therefore, if you receive a notice of a lawsuit, consult with your lawyer immediately to file a motion to dismiss based on a statute of limitations defense, and a countersuit for the violation of the FDCPA.

What to do? Here's where you play Whack-A-Mole. Each time you receive a dunning letter from a new collection agent, send it a written cease communications notice. If a collection agent violates your cease communications demand, consult with your lawyer about filing a lawsuit for violating the FDCPA.

On to your questions:
  1. Collection agents are permitted to ask consumers in most states to pay time-barred debt. The exceptions are residents of Wisconsin and Mississippi. As mentioned, a collection agent filing a lawsuit on a time-barred debt violates the FDCPA
  2. See No. 1.
  3. For the reason mentioned above, you have no legal obligation to pay time-barred debt. Your collection account is, for all intents and purposes, worthless. You might want to consider paying the collection agent $10 to put this to rest, but I wouldn't spend more than that for time-barred debt.

Consult with your lawyer before signing any settlement agreement on time-barred debt, or, as mentioned, you receive notice of a lawsuit.

Marisa B.
Sacramento, CA  |  March 28, 2014
I recently began receiving notices and phone calls from a local County "revenue recovery" division. Basically, part of the court system in El Dorado County. They claim I still owe roughly $1000 from an unpaid traffic ticket from 2000. I believe I have paid this debt (to a debt collection agency that is no longer in business), but I cannot prove I have paid this since it's been 14 years and I don't keep payment records that far back. Does a SOL apply to debt you owe the court? Any other suggestions on how to resolve this? I have contacted the two collection agencies that they have used in the past but neither have any record of my file. Thanks for your help!
April 17, 2014
Whether a debt you allegedly owe a government entity is subject to a state statute of limitations is tricky to answer. If the debt is a result of a citation, such as a parking or traffic ticket, then there usually is no statute of limitations.
Tim K.
Torrance, CA  |  March 19, 2014
Our home foreclosed in late 2007 by the first mortgage. We had an equity line of credit on the home and last payment on the equity line was 8/2007. The credit union charged off the HELOC on January 31 2008. They served us in January 2013. We have a court date coming up next month -- April 2014. Is this past the statute of limitations?
March 19, 2014
Consult with a lawyer immediately about filing a motion to dismiss based on a statute of limitations defense. Take action — you may be able to defeat this lawsuit. Taking no action will result in your losing by default.
Steve P.
El Dorado Hills, CA  |  April 11, 2014
Hi Tim - I'm in a similar situation and would love to know where you stand on your court case. Did you or your attorney present the SOL defense. Thanks!
Susy S.
Fremont, CA  |  March 14, 2014
I opened a loan with Cash Call sometime in January 2007 under my married name. From what credit report says I defaulted on November 2007. Since then I have divorced and moved from city to city in California. Just a few days ago and today I got a call from a rather rude man stating that he would have no other choice to file a law suit against me for not calling the agency in regards to this debt. From what I have read and everyone's scenario. Do I fall under the SOL? My biggest worry is that they will garnish my wages. I am a single mother of 3 and my income is the only income coming into our household. Thank you for your help.
March 14, 2014
My answer assumes you resided in California continuously from January 2007 when you borrowed the money until today.

Take these three steps:
  1. Validate the debt. A debt that cannot be validated cannot be collected. Roughly half of all collection accounts cannot be validated.
  2. When you send the debt validation notice, include a cease communications notice.
  3. If you receive notice of a lawsuit, consult with a lawyer immediately, and discuss filing an answer that includes a statute of limitations defense.

Why bother with a debt validation notice? The older the debt, the less likely it is the collection agent can validate the debt. And, as mentioned, if a collection cannot validate the debt, its collection efforts must stop.

Why send a cease communications notice? To make this collection agent stop pestering you.

Why consult with a lawyer about a time-barred debt a collection agent has filed suit on? Two reasons. First, an effective statute of limitations defense will cause a judge to dismiss a lawsuit. Second, you may have the right to counter-sue for an Fair Debt Collection Practices Act violation, and make the collection agent pay for its misunderstanding of the FDCPA.

Paul F.
Lake Los Angeles, CA  |  April 18, 2014
I recently received a call from a collection agency regarding a debt from 2006, I mentioned the 4 year SOL and they asked if I wanted them to validate the debt, they proceeded to warn me that if I have them validate the debt and it comes back as being valid then the SOL time frame will start all over again, is this true or are they blowing smoke?
April 18, 2014
I am not aware of any state with a statute or case law where validating a debt restarts the statute of limitations.

I will assume you are a California resident. In California, the only way you can reset a breach of contract statute of limitations is to either make a voluntary payment or a written reinstatement of the debt.

What the collection agent may be arguing is a written request for validation is equivalent to a reinstatement. California case law would disagree. But be careful. When you send a debt validation letter, do not use phrases like "My debt" or "The amount I owe" or "My account." Instead, use a phrase like, "The account you attribute to me" or "The account in question" or "Account ABC-123."

See the debt validation article to learn the proper way to validate a debt.
X. Y.
San Francisco, CA  |  March 07, 2014
I reside in California and incurred medicals bills while in Nevada on a vacation that was not paid and turned to collections. Would the statute of limitations from Nevada or California apply? Meaning is it where the creditor establishes business, where the debtor resides, or where the lawsuit would be filed?
March 07, 2014
Both the original creditor or its collection agent could file a lawsuit against you in either state. It is most likely, though not a certainty, the action would be in your state of residence. Consult with a lawyer if you receive a notice of a lawsuit.
J. M.
Los Angeles, CA  |  February 19, 2014
I just found out that a collection agency garnish money from my checking account without my knowledge or approval. Can they do that? I asked my bank the name of the collection agency but all the customer service agent gave me is the phone number of the compnay which links to Gordon & Wong Law firm and also my bank company cannot give me the name of the company that withdraw the money (all the agent told me was California and the descriptionof the transaction in my checking account was Legal Order Fee. I did not received any summons from any debt collectors and I have been living in California for almost 25 years.
February 20, 2014
Under California law, you should have received a notice of the lawsuit, and a notice of a pending wage garnishment. A lawyer's failure to follow California's civil procedure rules may be grounds to vacate the judgment and subject the lawyer to discipline by the California Bar.

Consult with a California lawyer immediately to file a motion to vacate the judgment. If you cannot afford a lawyer, contact Law Help CA or another California pro bono program to find no-cost legal services.
Tawny K.
Moreno Valley, CA  |  February 10, 2014
My last pmt on a credit card was November 30, 2007 and it was charged off July 26, 2008 when does the SOL begin? Can I still be sued by them, it seems to be over 4 years.
February 10, 2014
I assume you reside in California. The California statute of limitations clock starts the date you missed your first payment. My guess is a court would find the clock began to run approximately January 1, 2008, and ran out in January 2012.

Both the original creditor or its collection agent can file a lawsuit against you after the statute of limitations clock runs out. If either does so, then file an answer to the complaint with a statute of limitations defense. Do not ignore a notice of a lawsuit. If you are sued, take action by consulting with a lawyer immediately.

Failure to take action will cause you to lose by default, which you do not want to do because you can defeat a time-expired debt with a simple answer to the court.
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