There is no legal time frame that sets a limit within which a creditor may seek to collect payment for an overdue debt. There are, however, time frames established by law within which a creditor must file a civil suit against a debtor to recover the default balance.
Statute of Limitations
The statute of limitations is a legal principle that prohibits a plaintiff from filing a civil action in court after a specified period of time has elapsed from the date the cause of action first accrued. Lawsuits filed beyond the designated statute of limitations period are said to be time-barred and may, upon motion of the defendant, be dismissed by the court. Each state establishes its own limitation periods for various legal causes of action, such as fraud, negligence and breach of contract.
Debt Recovery Actions
Since the creditor/debtor relationship is based on a legally binding agreement, the applicable limitations period for filing a lawsuit to recover a default balance owed by the debtor would be the statute of limitations period established for breach of contract actions for the state in which a debtor resides.
Time Periods Established by Each State
Statute of limitations periods can vary by state for the identical cause of action. In Massachusetts, the statute of limitations period that governs the filing of breach of contract actions is six years. In New Hampshire, the limitations period is three years. For purposes of computing the time frame for the statute of limitations for an action to recover debt owed, the creditor's cause of action accrues, or begins, on the date the contract for repayment was breached by the debtor or the date the credit account went into default. The statute of limitations clock stops on the date the creditor files his action in court.
Procedural Requirements
The statute of limitations is an affirmative defense that must be raised by the debtor when the action is filed against him in court. In most jurisdictions, this is accomplished by citing the applicable statute of limitations in the answer to the creditor's complaint. Once the debtor raises the issue In a timely manner, he can request that the court dismiss the action for failing to comply with the relevant limitations period. The statute of limitations operates as an absolute bar to the filing of another legal action against the debtor on the particular debt for which the suit was filed.
Considerations
The statute of limitations does not extinguish the debt; it merely precludes the creditor from using the legal process to compel the debtor to repay any sums due. A creditor may continue with nonlegal collection efforts if it chooses.
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