Every state has laws that limit how long people have to take certain actions. These laws, known as statutes of limitations, apply to everything from how long the state has to prosecute someone for a crime to how long creditors have to collect on unpaid debts. Arizona's statute of limitations imposes different limits on different kinds of debts.
Statute of Limitations
A statute of limitations on debts limits how much time a creditor has to file a lawsuit against a debtor who has failed to pay back a loan. Arizona's statutes of limitations on debts starts as soon as a debtor fails to pay back a debt. For example, if you get a credit card and make payments on your bills for two years and only then fall behind on your payments, the statute of limitations starts as soon as you fail to pay, not when you take out the credit card.
Debt Types
Arizona has different statues of limitations that apply to various kinds of debt incurred. There are four kinds of debt a consumer can enter into: open accounts, written contracts, promissory notes and oral agreements. Credit cards are the most common form of an open contract, a type of loan where the amount changes over time. A written contract is a written loan agreement, while a promissory note is a note given from the borrower to the seller that provides an unconditional promise to pay. An oral agreement is a verbal contract between parties, that is not accompanied by written documentation.
Statutes of Limitations
Arizona limits actions on open accounts to three years, written contracts to six years, promissory notes to five years and oral agreements to three years. However, written contracts that were entered into outside the state are limited to four years, according to BCS Alliance. The state also limits judgments on debts. The state has a five-year statute of limitations on domestic judgments, though these can be renewed indefinitely.
Loan Terms
You've no doubt heard it before, but when it comes to loan terms and statutes of limitations, reading the fine print is especially important. Lenders often include terms and conditions in the loan agreement that make Arizona's statute of limitations irrelevant in your loan. These provisions, known as "choice of law" clauses, change what laws apply to your agreement. A car loan company, for example, can choose to have Delaware's state laws apply to the terms of your agreement.
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