Statute of Limitations for Overdue Debt

A statute of limitations, sometimes called a "statute of repose," bars lawsuits filed after the expiration of a time limit set forth in the statute. In debt collection cases, a defendant can sometimes raise the statute of limitations to beat the lawsuit even if the underlying debt is otherwise valid. As most debt collections cases are based upon state law, however, the specific limitations period will vary from state to state.

Length of Limitations Period

The length of time a plaintiff has to file a given lawsuit can usually be found in a state's legal code under a section heading such as "limitation of actions." Exactly how long the limitations period is depends not only on the state, but also the type of claim. In North Carolina, for example, general breach of contract cases and suits for money owed are governed by a three-year statute, but wrongful death has a two-year statute and suits based upon documents under seal have a 10-year statute.

When the Statute Begins to Run

The statute on a given claim begins to run when the cause of action "accrues," which means when the underlying facts constituting the claim have all occurred. In an automobile negligence case, the statute begins running on the date of the accident. With debt cases and suits for money owed, the statute usually begins running on the date of the first missed payment. A forbearance agreement between the debtor and creditor can toll the statute, or stop it from running, for a period of time. Making a payment on the debt within the limitations period can reset the statute and start it running all over again.

Creditor's Factors Affecting the Statute

All states have a list of factors that toll the statute of limitations under certain circumstances. The statute does not begin to run against a plaintiff who is legally incompetent due to some disability or youth at the time the cause of action accrues. It starts running on the day the disability is removed or the minor turns 18. Some states also toll the statute where the plaintiff is away from the state on deployment with the U.S. military or is a national of a country at war with the United States. Very seldom will a plaintiff in the typical debtor-creditor case be entitled to a tolling of the statute based upon one of these factors.

Debtor's Factors Affecting the Statute

States also have lists of debtor-related factors that can toll the statute of limitations. Many states toll the statute when the debtor is away on military deployment; if the state statute does not afford protection to military servicemembers, the federal Soldiers and Sailors Civil Relief Act does in certain cases. Some states pause the statute where the debtor moves out of state or hides from service of process inside the state. This is to prevent a debtor from gaining an advantage in the case by dodging a creditor's efforts to exercise its collection rights.