Will the statute of limitations on my old credit card debt restart if I move to another state?
Some statute of limitations questions are tough to answer. This is one of them.
Will you restart the statute of limitations on debt if you move from one state to another? The short answer is, “You will probably not restart a statute of limitations if you change your state of residence.”
The long answer is more complicated, and much depends on your circumstances.
The statute of limitations for debt varies from state to state, and by type of debt. The statute of limitations for debt usually starts at the moment of breach. This means most courts start the statute of limitations clock when you miss your payment. Once started, the statute of limitations clock runs for as long as you:
Voluntary Payment: Making a voluntary payment, even a couple of dollars, restarts the statute of limitations clock. Clever collection agents try to convince consumers to make a $10 or $20 payment as a “Sign of good faith.” All this payment does is buy the collection agent and its lawyer more time to collect the debt and, if they are aggressive, file a lawsuit against you. You may want to pay an old debt, but don’t make a payment “as a sign of good faith.”
Acknowledge Debt: A written promise to pay a debt will reset the statute of limitations in most states. A promise to pay an old debt is called an “acknowledgment.” Most states require the acknowledgement to be in writing. Be careful when negotiating a debt settlement that you do not accidentally tell the other side you acknowledge the debt.
Are Available: The law in most states requires you be available for service of process. A service of process is the formal legal process by which you are presented with the notice of a lawsuit. “Available” means different things in different states. Most states agree if you leave US soil you’re unavailable to receive service of process. Some states say you’re unavailable when you leave the state.
The statute of limitations clock pauses when you’re unavailable for service of process. This pause is called “tolling” by lawyers. Each state has its own statute of limitations tolling rules.
Tolling is pretty simple. Let’s say your debt's statute of limitations is 4 years. In the middle of that 4-year stretch, you move to Italy for 6 months and the other side knows you were out of the country that length of time. The tolling rule causes your debt’s statute of limitations to become, in effect, 4 years 6 months.
As mentioned, each state has its own statute of limitations rules. The statute of limitations for the state you resided in when debt occurred may be 4 years, and your new state of residence uses a 10-year rule. Which applies? This is one of the tricky parts of your question.
Generally, courts like to use their state’s rules. Courts must use another state’s statute of limitations rule when justice requires it. However, judges usually bend over backwards to use their home state’s rules because these are the rules they and the lawyers involved understand.
A party filing a lawsuit must do so in a court that has jurisdiction over everyone involved. Here’s where we get into the heart of your question. Which court has jurisdiction over this case: A court where you lived before? Or, a court where you live now? What if the contract says everyone agrees to a different court? Where the case is tried usually, but not always, determines which statute of limitations rule applies.
Generally, courts first look to the contract to see if there’s a choice of laws clause. A choice of laws clause says something like, “The creditor may be based in New York, and you the consumer may live in California, but if there’s ever a dispute about this contract, we agree to fight this out using Illinois rules in an Illinois court.”
Your first task is to dig out your contract with the creditor to see if it contains a choice of laws clause. Both parties can waive a choice of laws clause. Or, one party can argue the choice of laws clause is unjust, and ask the court to dismiss the case. However, the US Supreme Court has found choice of laws clauses as Constitutional, so if you’re sued in an out-of-state court, you may have to defend yourself there.
Our analysis does not stop here. What if there is no choice of laws clause in the contract? State laws vary, but the usual rule is the party bringing the lawsuit can do so in the state where the damages occurred. This tips the answer to your question to a court in the state where you lived.
We can’t stop the analysis here, either. If the party bringing the lawsuit is a collection agent, then special federal rules apply to collection agent lawsuits. These rules are found in the Fair Debt Collection Practices Act. Under the FDCPA, a collection agent must file a lawsuit against a consumer in either the state where the contract was signed, or where the consumer now resides.
This means that if a collection agent sues you, it must do so either in your old state (if you signed the contract there) or your new state of residence. Original creditors usually do not need to follow this rule.
If you receive notice of a lawsuit, consult with a lawyer in your state immediately. Never ignore a lawsuit. You might be able to defeat a lawsuit easily by raising the statute of limitations, filing a motion to dismiss based on incorrect venue, a defect in the complaint, or another defense.
Most consumers lose debt-related lawsuits by default. Many of these consumers could have defeated these lawsuits by filing a statute of limitations or other defense. Unscrupulous collection agents bank on consumers taking no action to defend themselves, and walk away with judgments that allow them to garnish wages, levy bank accounts, place liens on property, and ask local sheriffs to seize their personal property.
I hope this information helps you Find. Learn & Save.