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Statute of Limitations

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 a creditor has to file a lawsuit depends on the

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

For example, many states allow more time for creditors 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 three to four years to file suit after default, but some states allow as many as 10 years. See the Bills.com Collection Laws and Statute of Limitations page.

The page I just mentioned contains a list of limitations by state. If a creditor 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).

However, 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. Although the periods vary from state to state, there is only one (Ohio) that is longer than 10 years.

One exception for Wisconsin residents: Wisconsin outlaws lawsuits against consumers in cases where the Wisconsin statute of limitation has passed.

What a Statute of Limitation is Not

The passing of the statute of limitation does not mean a 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 a creditor 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.

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 the clock on a statute of limitations back to zero in two ways:

  1. Make a 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 in a minute or two using Google’s search engine.

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.

Charge Off and Statute of Limitations

Many 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 four key issues to a statute of limitations question:

  1. Did the parties agree to a choice of laws in their contract? Review the original 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. Assuming the litigants reside in different states, what are the statutes of limitations for each state?
  3. How does each state’s supreme court look at statutes of limitations conflicts with sister states?
  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?

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.

Comments (335)


Thomas H.
Port Saint Lucie, FL  |  February 25, 2012
Hello, My wife received a copy of judgment (filed June 2010) that was originally filed in July of 1992. This is the first I have heard of this. At the time she was married to her ex-husband. We live in Florida and the SOL that I have seen online is 20 years. Is this from the original judgment? Is she liable for the entire amount? They also stated that there was 12% interest charging on this account. Everything I have seen says 10% is max. Is it compound or simple? I am dumbfounded that after 19 yrs and 7 months this issue has surfaced. Any advice would be greatly appreciated.
Bills.com
February 27, 2012
A Florida judgment has a 20-year statute of limitations, but this can be renewed another 20 years. The statute of limitations starts from the date of the judgment.

Regarding interest, states allow simple interest by default. In some cases, however, compound interest is allowed. These are typically contracts cases where compound interest is mentioned in a liquidated damages clause. Consult with a lawyer in your state for a more precise answer.

Interest rates on Florida judgments vary over time. See the Florida Department of Financial Services Statutory Interest Rates Pursuant To Section 55.03, Florida Statutes page for details.
Gee Q.
Sanger, CA  |  February 23, 2012
I have 2 judgements that are reported on my tri-merge credit report. One was filed on November 2007 and the second was filed on July 2007. Does the statue of limitations apply to judgments too; if so I recently certified mailed a Pay to delete letter to both companies. Please advise.
Bills.com
February 23, 2012
There are different SOLs for judgments than there are for consumer debt. Both vary from state to state. You can view the SOL on judgments on the chart on Bills.com statute of limitations page.

In many states judgments can be renewed. Judgments can stay on a credit report for as long as they remain valid or for seven and a half years, whichever is longer.

I don't think that a pay for delete will work, but please report back and let us know how it goes.
Avatar
Gee Q.
Sanger, CA  |  February 23, 2012
one of the judgments was due to a medical bill and the second was due to a Sears department store account. Does that make a difference?
Bills.com
February 24, 2012
In all states I am aware of, there is no distinction between a judgment for medical debt, credit card debt, deficiency balance debt, and so on. Tax judgments may be treated differently, however.
Peter N.
Westminster, CA  |  February 23, 2012
I have 1st mortgage on my principal residence with Countrywide. I did not make any payment since July 07. I filed a complaint against Countrywide, BOA, Recontrust and my case is still pending. I then filed chapter 13 and now The Bank of NY filed a claim. Can I object the claim base on the SOL?
Bills.com
February 23, 2012
The SOL on debt does not run during a bankruptcy. I don't think that strategy would work. Check with your bankruptcy attorney, to get a professional legal opinion.
Gee Q.
Sanger, CA  |  February 22, 2012
If the S.O.L in California is 4 years (based on the last activity on the account/ ex: last payment paid on the acccount), I understand that I can tell the judge if I go to court that the original debt has expired per the S.O.L, but for those who have expired but are not with ah law firm and have issued a judgment on the debt, what recourse do I have? I received a summons back in 2010 that involved a collection agency trying to collect on a total of 4 medical accounts (Kings Credit Services) and hired an attorney (Hunt & Henriques) to aquire a judgment in my county. The case was dismissed because they tried to put a levy on my dads property which I never owned. I contacted them and issued documentation to show them I was not the legal owner. They send me a paper stating that the levy was waived. Recently, on 1/30/2010, I received a summons from the same law firm representing the same collection agency (Kings Credit Services) with a same case number to garnish my wages. I contacted the sherrif's deparment in my county and said the case was released and had no current paperwork for wage garnishment. I then called the sherrif's department in the county where the credit collection agency is and they verified there was a levy ordered to garnish my wages. I contacted my payroll and they verified that there was a court order to garnish 25% of my bi-weekly pay. I do not feel like I was given the opportunity to validate the debt since it was doubled after their interest, penalties and court fees and I never went to court for it. Can someone please guide me in the right direction on what to do, and if there is anything I can do to counterclaim the collection agency, Respectfully, Gee Q
Bills.com
February 22, 2012
I recommend that you speak with a lawyer. If you are stating that a judgment was awarded because you were not able to make the argument about expired SOL, then see if an attorney can help you get an order to vacate the judgment.

However, if the judgment is valid, you are liable for accrued interest, even post-judgment. The attorney with whom you consult will advise you whether or not the fees that have been added to your debt are legal and were calculated properly.
Avatar
Gee Q.
Sanger, CA  |  February 22, 2012
Thank you for the insight. What type of attorney should I consult with?
Bills.com
February 22, 2012
A lawyer with civil litigation experience is best equipped to analyze a statute of limitations question.
Dale A.
Albany, NY  |  February 21, 2012
I am living in NY now but will be moving to NH shortly for a new job. I have three charged off credit card debts that have not had any payments for a little over three years on two of them and one that's two years old. Will the statute of limitations apply from NY which is 6 years or NH which is 3 years ? Thanks
Bills.com
February 22, 2012
Statute of limitations questions are tricky. It is likely that once you establish residency in NH that you will be governed by NH collection laws. However, issues such as tolling or the presence of a choice of laws clause could come into play. SOL laws vary from state to state, so speak with a lawyer in NH to get a professional opinion. Please report back, so other readers gain from what you learn.
Crystal H.
Saint Helens, OR  |  February 18, 2012
Today,a summons from a C.C.Debt Collector was given to my father...for me! At his home; I don't live there. I have never lived there.He lives in the same county, but a different town. I have lived at my present address for over 15yrs. I have personally received nothing at my own home. Is this even legal?!! Apparently back in October of 2011, a lawyer contacted my father by phone and interrogated him for info about me. My father is very ill,and was confused, but did tell the man I did not live there. My father was told I could be put in jail for a $4500.00 credit card debt. Also, I believe this debt is inflated, and not the original credit card company. I am from Oregon,and I believe the SoL is up, but I may have made a payment in 2008. I can not pay this. Should I get the summons from my dad and answer it, or what ignore it because I wasn't properly served?
Bills.com
February 20, 2012
First of all a creditor is not allowed to harass a debtor, including making threats about going to jail. I suggest you read the Bills.com article about being harassed by collector. If the creditor can easily find your address it is not clear why they would serve a summons to your father. I suggest that you speak with a local attorney about the legality of the summons and the SOL issue. It is best not to ignore the situation, because it is likely that a court judgment will be mad against you, if you do not correctly respond.
Winding D.
Santa Clarita, CA  |  February 17, 2012
On SSD, needed to use card for food and emergencies, family has helped me as much as they can, NOW Im on my own, condo and food and utilities I cant even pay in full, I have to apply for food stamps, I can't pay my credit cards now.. so can the credit card companies take my SSD payments? SO Scared!
Bills.com
February 19, 2012
No credit card company can come after your income or assets without a judgment against you. If the creditor obtains a judgment, your SSD income is not subject to garnishment. If a judgment is obtained, it is possible that other assets you own could be at risk and money in your bank account could be levied, depending on your state's collection laws.
Lindsay H.
Jefferson, GA  |  February 16, 2012
My situation is a little crazy. I went to the doctor when I first turned 18, and didn't realize that I needed to pay a $25 copay. I didn't have the money for it, and they said that they would bill me. Ten years and five addresses later, a collection agent calls saying that with interest my copay is now over $6000!
Bills.com
February 16, 2012
First, validate the debt. Do not pay a debt if the collection agent cannot validate it. Second, if the collection agent validates the debt, then negotiate a settlement for $50 or so. I picked $50 because the collection agent bought the debt for pennies on the dollar, and despite the collection account having a $6,000 face value, 99.996% of that $6,000 are made-up charges with no basis in reality.
Catherine A.
Bellingham, WA  |  February 16, 2012
OK, So a dear friend of mine just found out that his license is suspended and the DMV wants 25000$ for a law suit that was the result of a car he sold that was crashed before he could make a bill of sale or the new owner could register it. My friend was never made aware of the crash and the buyer disappeared. The court documents where served more than 2 years ago to his foster dads former business location. A commercial address that his dad hadn't rented for years that had no affiliation with anyone he knew even remotely. The case went to court over 2 years ago and he had been unaware of anything until he tried to renew his drivers license. But he had been pulled over many times over the last two years that i know of, and the officers have never mentioned his licence being suspended. Why would the charges not be served until he tried to renew his license? Can he challenge the suit because the court hearing documents were not properly served. How is he supposed to be fiscally responsible if he became unemployed because they took his license without any prior notice or warning.
Bills.com
February 16, 2012
Tell your friend to consult with a lawyer who has criminal or civil litigation experience. The lawyer will gather all of the facts regarding this unusual case, and file a motion to vacate the judgment.
Tony H.
Memphis, TN  |  February 14, 2012
I have driving on revoked driver's licenses from 1998 I paid 3,800 in 2002 to get them back and in 2010 they stopped me and charged me with driving on revoked How and what paper's should I file to have these fines removed so I can get my licenses back I do realize that I will have to pay the State of Tennessee a reinstatement fee for each offense before they will let me get a driver's license but I had a valid license from 2002 until 2010 I don't know what papers or how to go about getting these fines dismissed I also received time suspended with each ticket
Bills.com
February 14, 2012
I suggest that you contact the Driver's Services division of the Tennessee State Government, to see what paperwork you need to provide them. If that doesn't help, consult with an attorney who will tell you what paperwork you need and will guide you through the system.
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