Analyzing a 3-State Statute of Limitations Issue
- Statute of limitations problems can be tricky.
- You may have agreed to use another state's rules.
- Collection agents must sue you in a court convenient to you.
I signed a contract in Missouri with an Arizona company. I now reside in Oklahoma. Which state's statute of limitations rules apply?
I'm a bit confused as to which state has jurisdiction on Statute of Limitations. I attended the University of Phoenix (online) back in April 2007. Long story short, professor neglect prompted me to drop the two courses two weeks in. I just got a call saying I owe 1k+ for 6 credit hours for courses not completed. I lived in MO at the time, but am now in OK. The collector is in MO, the creditor, UoP, is in AZ. Which state do I go by?
You mentioned the laws regarding the statute of limitations for a breach of contract in Missouri, Arizona, and Oklahoma. Let us start there. Here are the consumer-related Oklahoma statutes of limitation at a glance:
- Written contracts: 5 years, (Title 12-95 A(1))
- Oral contract: 3 years (Title 12-95 A(2))
- Oklahoma judgment: 5 years (Title 12-735) and can be renewed
- Foreign judgment: 3 years (Title 12-95 A(2))
Here are the relevant Missouri statutes of limitation:
- Written contracts: 10 years depending on the circumstances (Section 516.110)
- Open accounts/credit cards: 5 years (Section 516.120)
- Missouri judgment: 10 years (Section 511) and can be renewed
Here are Arizona’s rules:
- Open accounts (credit cards): 3 years (§ 12-543)
- Oral contracts: 3 years (§ 12-543)
- Written contracts: 6 years (§ 12-546)
- Arizona judgment: 5 years (§ 12-1551(B)
Assuming the contract was written, the statute of limitations could be:
- 5 years, because that was the state where you signed the contract
- 6 years, because that is the headquarters of the other party to the contract, or
- 10 years, because that is now your state of residence
There is a fourth possibility, too: none of the above. How could it be another answer? You may have agreed in your contract to use a certain state's laws if a controversy arose from the contract.
What is the right answer? First, look at the contract you signed with the school. If the contract has a section called something like Choice of Laws then both parties agreed to use that state's courts should both parties ever file an action against the other. Does this mean a collection agent working on behalf of the original creditor is bound by that clause of the contract. Not necessarily.
The Fair Debt Collection Practices Act (FDCPA), a federal law, sets the rules collection agents must follow. Under the FDCPA, a collection agent is permitted to file an action (a lawsuit) against a consumer in a court that is convenient to the consumer. In other words, a collection agent must file an action in the consumer’s closest state court.
Judges like to follow familiar rules. A collection agent may argue, "The original creditor and the defendant agreed to follow that other state’s rules, which has a 6-year statute of limitations, not five like ours." In some instances, the judge will agree to use the other state’s rules, including the statutes of limitation. But in most cases, judges will bend over backwards to find reasons to apply familiar, local laws.
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Here, you reside in Oklahoma, which has a 5-year statute of limitations on written contracts. You mentioned a collection agent is attempting to collect the debt. Collection agents are bound by the FDCPA, which means it must file any action against you regarding this debt in your state of residence. You mentioned you attended the school in April 2007. You do not mentioned when your tuition payment was due. If your payment was due about that time, the Oklahoma statute of limitations has passed on this debt.
This does not mean the collection agent must stop its collection efforts. A statute of limitations in Oklahoma is an defense you can raise should the collection agent ever file an action against you. It is not a collections prevention law.
I have two pieces of advice. First, should the collection agent or original creditor file an action against you, consult with a lawyer immediately. Second, if the collection agent contacts you again, ask for all of its contact information, and send it a debt validation letter. It may not be able to validate the debt. If it cannot, then it may not attempt to collect the debt from you.
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Dealing with debt
Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q4 2022 was $16.91 trillion. Housing debt totaled $12.26 trillion and non-housing debt was $4.65 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 10% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Louisiana, 16% have student loan debt. Of those holding student loan debt, 10% are in default. Auto/retail loan delinquency rate is 7%.
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