Statute of Limitations

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Contract
HIGHLIGHTS
  • Analyzing which statute of limitations applies is more difficult than it first appears.
  • Look to the contract you signed to see if it has a choice of laws clause.

How to Tell Which Statute of Limitations Applies to Your Situation

This article helps Bills.com readers analyze their statute of limitations questions. Statutes of limitations seem straight forward at first glance, but can become tricky because each state legislature created their own rules for handling time limits on actions.

What Is a Statute of Limitation?

All jurisdictions have a body of statutes in their codes of law called limitations of actions, periods of prescription, and prescriptive periods, commonly referred to as the statutes of limitations. The idea behind these laws is we as a society decided we do not want old debts hanging around forever — we want people and businesses to move on with their lives without worrying about being sued. States and the federal government set statutes of limitations for civil and criminal actions. Each state legislature wrote dozens of statutes of limitation.

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The length of time an original creditor or collection agent have to file a lawsuit depends on the:

  • Consumer’s state of residence
  • Type of debt
  • Contract with the lender (more about contracts below)

For example, many states allow more time for original creditors and collection agents to file suit to collect on closed-ended consumer loans, such as vehicle loans, than on credit card debts or spoken contracts. Most states give credit card issuers 3 to 4 years to file suit after default, but some states allow as many as 10 years. See the Bills.com page collection laws for every state in the US.

Here’s a page containing a list of statute of limitations by state. If an original creditor or collection agent files a lawsuit after the allowed time, the court will usually throw the case out and not allow the creditor to file suit again (called dismissed with prejudice) if the consumer/defendant raises the statute of limitations defense.

The defendant must raise the issue of expired statute of limitations in a written response to the lawsuit, or else the court will not know that the statute of limitations has expired. Courts will not raise the statute of limitations defense on behalf of the consumer. Therefore, you must raise the statute of defense if it is available to you. Although the periods vary from state to state, there is only one (Ohio) that is longer than 10 years.

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.

What a Statute of Limitation is Not

The passing of the statute of limitation does not mean an original creditor cannot file a lawsuit against a consumer in most states. The passing does not mean the debt is canceled or extinguished, or must be removed from a consumer’s credit report. It does not prevent an original creditor or collection agent from contacting the consumer to collect the debt.

A statute of limitations, in most states, is just a tool for lawyers to use as a defense in a lawsuit. It is an affirmative defense the defendant must raise in a timely manner before the conclusion of the trial.

Wise Advice Most courts find it is a violation of the FDCPA for a collection agent to pursue a debt collection lawsuit against a consumer after the statute of limitation expired (Kimber v. Federal Financial Corp. 668 F.Supp. 1480 (1987)). Some collection agents still sue in hopes the consumer will not know this rule.

Choice of Laws and Tolling

The statute of limitations for a debt can be set in a contract with a choice of laws clause. A credit card issuer can write a clause that says something to the effect of, “Our headquarters may be in New York, and you may reside in Ohio, but if a dispute arises from this contract, we agree to use the laws of Delaware.” Most judges despise choice of laws clauses, and will make efforts to find reasons to ignore them in favor of their own state laws. However, the US Supreme Court ruled that choice of laws clauses in consumer contracts conform to the Constitution. Therefore, any statute of limitations analysis should include a review of the contract the consumer signed.

Tolling can also affect a debt’s statute of limitations. Tolling refers to a time-out on the running clock of the statute of limitations. In some jurisdictions, a debtor can take an action that is viewed as preventing reasonable efforts by the creditor to collect on the debt. For example, if a debtor leaves the country for a few years, the court may decide that because the creditor did not have a fair chance to collect, the statute of limitations was not running during the time the debtor was abroad. Tolling rules vary from state to state.

Resetting a Statute of Limitations

For debt, the statute of limitations starts either when the debtor last made a payment, or when the payment was due. Once the statute of limitations on a debt is reached, the creditor may use the court system to collect the debt. However, if the debtor/defendant raises the affirmative defense of statute of limitations in a timely manner, the court must dismiss the case. A court will not raise the statute of limitations defense on its own — the court is a neutral referee — the defendant must raise this defense.

A defendant can reset a statute of limitations clock back to zero two ways:

  1. Make a voluntary payment
  2. Acknowledge the debt

Under common law, the acknowledgment must be in writing and convey the idea the consumer promises to pay the debt. Not surprisingly, many state legislatures wrote their own version of this rule. Arizona, Florida, New York, and Oregon are four such states one can find with acknowledgment of barred action rules.

Statute of Limitations on Credit Card Debt

States wrote statutes of limitations laws before the invention of credit cards. Some state courts throw credit card debt in the written contracts bin. Others consider credit cards open accounts, which were written with bar tabs and feed store accounts in mind that are customarily settled at the end of the month. Other state courts lump credit cards with spoken/verbal contracts. Each of these often have different statutes of limitation.

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Charge Off and Statute of Limitations

Some consumers confuse charge-off and statutes of limitations. The two concepts have no relationship to each other. Charge off is an accounting term used by creditors when they move a delinquent account from its accounts receivable ledger to the bad-debt line on the general ledger. This usually occurs between 180 and 240 days from the date of the last payment. The fact an account is charged-off does not mean the debt may not be collected later. The charge-off date does not correspond to the statute of limitations on collecting a debt.

Analyzing a Statute of Limitations Issue

There are at least five key issues to a statute of limitations question:

  1. Did the parties agree to a choice of laws in their contract? Review the contract, and look for a “choice of laws” clause in the contract. If the contract states which state laws the parties agree to use if a dispute arises from the contract, then there is the answer to your question. However, although choice of laws clauses are well litigated, some judges take pains to find reasons to ignore a choice of laws clause.
  2. What are the statutes of limitations for the plaintiff’s state? The defendant’s? Assuming the litigants reside in different states, the statutes of limitations for each state may be different.
  3. How does each state’s supreme court look at statutes of limitations conflicts with sister states? Consult with a lawyer in your state who has consumer law experience to learn how your state resolves conflicts-of-laws issues.
  4. Is the plaintiff filing the case in its home state, or in the defendant’s state of residence? And if it is filing the case in the defendant’s state, is it asking the court to use a different state’s statute of limitations?
  5. Who is the plaintiff? If the party filing the lawsuit is the original creditor, then the court will give a great deal of weight to the choice-of-laws clause in the contract. If the plaintiff is a collection agent, under the FDCPA, collection agents for a credit card or similar debt must file a lawsuit either in a court where the consumer lives, or the judicial district where the consumer signed the contract (15 USC § 1692i). Judges like to use familiar laws and will bend over backwards to use their state’s statute of limitations. However, if the plaintiff’s lawyer creates a convincing argument that another state’s statute of limitations is more appropriate, the judge may agree.

Statute of limitations questions seem straight forward: “Which statute of limitations applies to me?” However, answering this question is tricky because a small change in facts can have a huge impact on finding the correct answer. If the facts are simple — for example, both parties reside in the same state and agree to use that state’s rules — the answer is simple. However, you need a deeper analysis if your facts are complex. Consult with a lawyer in your state who has consumer law or civil litigation experience if your facts are complicated.

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Comments (439)


Kim J.
Santa Monica, CA  |  April 16, 2014
My ex-husband took out a car loan in 2010 when we lived in Hawaii. We moved back to California that same year (he was discharged from the military). After living in California for a few months the car was repossessed. I keep receiving letters stating we owe x amount of money. I asked for a letter of validation because I do not remember signing the contract. If it turns out the debt is valid, can they still sue me even though I no longer live in Hawaii? The debt is still with the original creditor, not a collection agency.
Bills.com
April 17, 2014
Your changing your state of residence will not prevent a lawsuit. You need other defenses to a possible lawsuit. Your never signing the contract is an excellent defense. Just because the lender or its collection agent says you signed is not proof you did.

Continue to insist on seeing proof you're a party to the loan. Debt validation is a start. Consult with a lawyer to learn more about your rights and potential liabilities.
Tifani R.
Tallahassee, FL  |  April 08, 2014
I had an outpatient surgery in February 2008 in Ga & lived in Fl at the time. I was on disability because of my condition & had medicare/medicaid & was part of vocational rehab. I was told everything would be covered & it was or so I thought. Last month I received an bill from the area where my procedure was done asking for thousands! It's been 6 years, they say they have generated & mailed the bill every month since the procedure but I find that hard to believe & 4 years after I moved to AL & got married. So which states statute of limitations applies to this medical bill? They say because it's so old it must be sent to collections despite me never hearing from them.(they claim they had no insurance ever filed but really they should have) also they recorded calling me in March 6 2012? I'd had the same cell# for years. I know they're building a new hospital so no way to know if they just want more money to fund that venture.
Bills.com
April 08, 2014
Validate the debt. A debt that cannot be validated cannot be collected. Roughly half of all collection accounts cannot be validated, so it is worth your time to send the collection agent a debt validation letter. Do so immediately.

Consult with a lawyer in your current state of residence to discuss the statute of limitations issue. You mentioned Alabama. If you are an Alabama resident, ask your lawyer which Alabama statute of limitations (the 6- or 10-year rule) an Alabama court would apply in your situation.
Miss P.
Vlg Of Lakewd, IL  |  April 07, 2014
Approximately 20-23 years ago I was in a severely abusive marriage. My ex, who I divorced in the early 90's passed away in 07, created a company to.repair people's credit. I had absolutely nothing to do with this company but he listed me as part owner because he knew if he got into trouble he wanted me to.go down with him. There was a suit filed against him , the company and me for being part owner. He was found guilty of felony theft and was fined. Obviously he was a scam artist and never paid the judgment. Today I received a letter from a law firm in Arizona trying to collect this.debt which is now $73,000.00. Since this happened 20 some years ago can they still collect this or is there a statue of limitations? I looked at the statute of limitations for Arizona but don't know if this can legally be collected after all these years. I can't believe this is happening and I am freaking out. I have major permanent damage from all the physical abuse and this whole situation is a nightmare that won't ever go away. Thank you very much in advance for your answer. Miss Petrified
Bills.com
April 08, 2014
The statute of limitations for an Arizona judgment is 5 years, but a judgment can be renewed. I do not know how many times Arizona allows a judgment to be renewed. Therefore, your smartest course of action is to consult with an Arizona lawyer who has civil litigation experience. He or she will research the legal question, and then research to learn if this particular judgment is still valid.
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Miss P.
Vlg Of Lakewd, IL  |  April 08, 2014
Thank you SO much for the fast reply. If a judgment is indeed renewed does anyone legally have to contact you to let you know? Up to this day I have never received anything regarding this except this letter that was mailed regular mail. It also does not state exactly what this amount is for. Also, the letter I received was sent regular mail by a law firm in my current state. I no longer live in Arizona and have not for 20 some years. At first I thought the law firm who contacted me was from Arizona but after looking at this letter again they are not in Arizona. Should I still contact a attorney in Arizona or is there a way I can call the court myself to see if this judgment was renewed myself? This website is amazing and you are helping so many people and I for one really appreciate your advice and help.
Bills.com
April 09, 2014
Neither the courts nor judgment-creditors are required to notify judgment-debtors a judgment has been renewed. The only way you can learn this information is to contact the court clerk where the judgment is filed. You can do this yourself if you happen to have enough information, such as the case number, or the name of the plaintiff and the date the judgment was filed.

Consult with a local lawyer in your state of residence who has consumer law experience to learn more about your rights and liabilities.
Ray J.
Jamestown, IN  |  March 17, 2014
I bought a car in 2007 in North Carolina. The last payment I made was while I was in North Carolina. I have since moved to Indiana. The car was repossessed in my transition period from North Carolina to Indiana and it was repossessed while I was in Indiana in 2008. I did not officially change my address and everything to Indiana until the end of 2008. I just now have received a letter stating I will be sued for the balance of the auto loan. I am wondering which states SOL applies, North Carolina or Indiana? North Carolina has a 3 year limit and Indiana has a 10 year limit I believe. The contract took place in North Carolina and the bank headquarters are there as well. This is the first collection attempt on the balance of the loan since it was repossessed almost 6 years ago. Thank You for your help
Bills.com
March 21, 2014
The short answer is either state's statute of limitations applies.

The original creditor or its collection agent, if they're smart, may file an action against you in Indiana because of its longer statute of limitations. If you are sued, your lawyer's challenge will be to convince the Indiana judge that he or she should use North Carolina's statute of limitations rules because both parties were residents in the state when the contract was signed, the default and repossession took place in North Carolina, the plaintiff sat on its rights for more than three years, and the plaintiff is now, in effect, forum shopping to use a forum with a longer statute of limitations.
Bill W.
March 12, 2014
We have been having a discussion regarding the statute of limitations on a credit card in California.
  • Question #1: Say an account is current on Jan. 1, 200x and the minimum payment due is $350.00 Beginning in Jan, the cardholder only pays $125.00 , and for the next 4 months (Feb through May) makes payments of only $125.00 (still short of the minimum payment due every month) No further payments are ever made from June 200x. At what date does the Statute of Limitations begin? With the first defaulted payment made in Jan because the cardholder failed to meet the minimum payment, or does the statue of limitations begin in June 200x when no payment is received at all?
  • Question #2: I have read, "In California A Bank of America card carries a three year statute (Delaware Corporate Headquarters) in most cases. In a very small percentage case the statute for a BofA card is 4 years." In what instance would the statute of limitations for a credit card debt i.e., that "small percentage of cases" increase the statue of limitations for BofA from 3 years to 4 years in California?
Bills.com
March 13, 2014
Excellent questions.
  1. 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." In the 1992 case, Spear v. Cal. State Automobile Ass’n, 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."

    You could argue the breach of contract occurred when the borrower paid less than 100% of the payment due in January. But that would ignore California case law regarding partial payments on promissory notes.

    In California, and other states, you can reset the clock on a state of limitations for breach of contract with a written acknowledgment of the the debt. California courts have found partial payment is deemed to be a sufficient acknowledgment of an unexpired debt to reset the statute of limitations clock (Curtis v. Holee, 184 Cal. 726 [195 P. 395, 18 A.L.R. 1024]; Concannon v. Smith, supra, 134 Cal. 14; Rodgers v. Byers, supra, 127 Cal. 528; Southern Pac. Co. v. Prosser, 122 Cal. 413 [52 P. 836, 55 P. 145]; McCormick v. Brown, 36 Cal. 180 [95 Am.Dec. 170].)

    Credit card debt is not a promissory note. However, it appears California courts follow the promissory note rule for partial payments on other contracts (County of Santa Clara v. Vargas 71 Cal. App. 3d 510, 1977).

    Regarding your first hypothetical question, it is likely a California Court would start the statute of limitations clock in May.
  2. As the original answer above mentions, courts look to the contracts to see if the two parties agreed to a choice of laws clause, which would include which state's statute of limitations to use.

    I have no idea what fraction of Bank of America credit card cases in California use Delaware or California's statute of limitations. I would be surprised anyone but the general council at Bank of America's credit card division would know that information.

    Were I a California lawyer representing a California consumer, I would try to discover if Bank of America could produce a contract signed by my client. If BofA could, I would read it carefully to learn if it contains a choice of laws clause. If the contract makes a Delaware choice, I would argue the 3-year statute of limitations applies. If BofA could not produce a signed contract, I would argue California's 2-year spoken contract statute of limitations applies.

If you received notice of a lawsuit, consult with a California lawyer immediately to discuss the particular facts in your case, and possible defenses.

Michael G.
Berkeley, CA  |  February 27, 2014
I'd received a call from a credit agency. First time that I'd heard from. I never got a bill from them in the mail, nor is the report showing up on my credit report. So I'd called them and they told me that it was for an xray that was taken back in 2008. According to the xray place, another collection agency that they're either a part of or merged with, sold the debt. The credit agency told me that they've merged with them. Anyways. My question is, can the credit report, report this to my credit report? This a bill that they got back in 2009. I'm reading about the SOL. Here the limit is 2004. I had paid an x-ray bill around that time, but it was with another collection agency. I'm waiting for them to call me back to confirm if it's the same bill or different.
Bills.com
March 10, 2014
Take these four steps:
  1. Validate the debt. A debt that cannot be validated cannot be collected. Roughly half of all collection accounts cannot be validated.
  2. Learn your state's statute of limitations. If the clock for your state's statute of limitations for written contracts expired, then send the collection agent a cease communications notice.
  3. If the collection agent validates the debt, and the statute of limitations clock has not expired, then negotiate a settlement to the debt. A settlement can be for less than the amount the collection agent claims you owe.
  4. If you receive a notice of a lawsuit, consult with a lawyer to file an answer. Ignoring a lawsuit will not make it go away and will almost certainly make your situation worse.

Ask any follow-up questions you may have about these four steps on the appropriate page.

Lynn W.
Burnsville, MN  |  February 27, 2014
Have 2 really old Captial One credit card debts for approx $5,000 total and by really old I mean I opened them around 1995 and the last payment I made was probably 1998. I made the mistake of questioning these debts on my credit report and that basically awoke the sleeping giants. They had left me alone for a long time but, after that came after with a vengeance. They sued me with judgements in 2006 for one and 2007 for the other, levied my bank and garnished my wages in 2010. After a layoff, I still owe some money on one of the debts and was just bank levied again. Can I get them to stop on this old debt?
Bills.com
March 10, 2014
Learn your state's laws for the statute of limitations on a judgment. Consult with a lawyer who has consumer law experience if the judgment expired.
Peyton S.
Kahului, HI  |  February 25, 2014
I recently moved and had a small balance to pay on my cable bill before I could get service to my new place. I went into the cable office and turned in all current equipment and gave them my new address. The lady was very nice and said when she would help me get an installation date when I came back to pay the balance. I went back a couple of weeks later to pay the balance and was told by another clerk that I had an old bill from 2003 AND that I never returned the equipment. She told me that in addition to paying off the current balance on my last account, I owed another $900+ for this old bill and cable box. I asked her how I could appeal this older bill and she said the only way was to prove I never lived at the address where the older bill was originated. I'm not saying I didn't live there, but it was just so long ago, I'm almost positive everything was turned in. Since 2003 I have always been able to receive services and was never advised that I owed or didn't return anything. Also, the bill in question was from another company that no longer exists and the new company, Oceanic (TWC) is still trying to collect. I asked if it wasn't your equipment/bill, how can you be 100% sure this is valid? All she said was they have a new system in place to verify these things. I live in Hawaii and it looks like the SOL for this is 6 years. What can I do? Mahalo!
Bills.com
February 25, 2014
You and the cable company are at a stand-off. It wants you to pay it $900 for bill from 11 years ago you may or may not owe as a condition for you to reopen an account. You, understandably, want proof you owe the company anything. You have three options:
  • Give in and pay the mystery fee in total
  • Negotiate a settlement for less than what the cable company wants
  • Do without cable, and say hello to satellite tv, Hulu Plus, Netflix, or Amazon Prime

If the cable company files a lawsuit against you to collect the debt, consult with a lawyer immediately to file an answer that includes a statute of limitations defense.

Avatar
Peyton S.
Kahului, HI  |  February 26, 2014
Do you think I could just write a letter stating the SOL and see what happens? Or do you have to wait until they file something?
Bills.com
February 26, 2014
A state statute of limitations for a civil action is a possible defense a defendant can raise when plaintiff files an action in court.

You can tell the cable company, "The statute of limitations on this debt is long since passed, and should you file a lawsuit against me I will raise this defense." To which the cable company may reply, "You're right. If we sue you, we'd lose if you raised the statute of limitations defense. But so what? No law forces us to do business with someone who won't pay money they owe us."

Cable companies are regulated monopolies. Learn what body regulates your cable company, and if it has a complaint office that handles billing or service disputes.
Cat B.
Mishawaka, IN  |  February 22, 2014
Summons from Unifund for credit card. CC was opened while I lived in state of Mississippi (SOL 3 years) but I now live in Indiana. While SOL do I have to abide by? Thanks
Bills.com
February 26, 2014
You mentioned you now reside in Indiana. Consult with an Indiana lawyer who has consumer law experience immediately. Your lawyer might be able to convince an Indiana judge that because the contract was signed in Mississippi, all parties expected that state's rules to apply. But there are many facts you didn't share in your comment that may be relevant to that argument, which your lawyer will suss-out from you.

If you cannot afford a lawyer, contact Indiana Legal Services or another Indiana pro bono program to find no-cost civil legal services.
Carol S.
Burien, WA  |  February 20, 2014
I had a debt that was in collections and was paid off 3 years ago. I was under the understanding the debt was paid off. I just received a letter from another collection agency threatening to sue me if I don't pay the balance in full. I live in Washington state. Does the statute of limitations apply here?
Bills.com
February 20, 2014
Assume you are dealing with a scam artist. Validate the debt. A debt that cannot be validated cannot be collected.

Dig out your records of the debt settlement from 3 years ago. Consult with a lawyer if this collection agent continues to pester you about this debt, and share your records of the old debt settlement with your lawyer.

Your state's statute of limitations may be a viable defense you can raise with the court if the new collection agent files a lawsuit against you.
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