Statues of Limitations on Debt

A statute of limitations is a law restricting the time period in which a plaintiff can file a lawsuit on a particular claim, such as debt owed to a creditor. Often referred to as a "statute of repose," such statutes are usually located in a state's legal code under the heading "limitation of actions." The statute of limitations varies both with the jurisdiction in question and the type of claim.

Statute of Limitations on Debt

Within a given state, the statute of limitations applicable to a lawsuit to collect a debt will vary depending on how the debt arose. A lawsuit for damages suffered by a plaintiff may be based upon a theory of negligence or intentional wrongdoing. A suit to recover money owed might be based upon a theory of breach of contract, such as failure to pay pursuant to the terms of a credit cardholder agreement. Different theories can have different statutes of limitations. Breach of contract can have different statutes of limitations based upon the kind of contract in question; in North Carolina, for example, breach of contract is subject to a three-year statute. For contracts "under seal" ---written contracts where the word "seal" appears after the debtor's signature ---that statute is 10 years.

When the Statute Starts to Run

An important point with any statute of limitations is when it accrues, or begins to run. Generally, the statute on a debt accrues when a reasonable time for repayment has passed. With a credit account, this will usually be the date of the last missed payment plus any applicable grace period. The statute of limitations would begin to run at the point where the debtor had violated the cardholder agreement or breached the agreement of the parties with regards to repayment. If the statute of limitations on that claim in that particular state was three years, the creditor would have three years from that date to file a lawsuit, after which time the claim would be forever barred.

Factors Pausing the Statute

State legal codes also have provisions that toll, or pause, the statute of limitations on any given claim. A statute usually does not begin to run against a minor, for example, until the minor reaches the age of majority. Against an insane person or incapacitated person, it does not begin to run until the insantiy or incapacity is resolved. Some states have provisions tolling the statute where the debtor has fled the state to avoid service of process, or where the plaintiff or potential defendant is deployed in the service of the U.S. military.

Using the Statute of Limitations

The protections of a statute of limitations aren't automatic. A debtor must raise the statute as an affirmative defense to the creditor's claim in a written answer filed with the court in which the lawsuit is pending. An affirmative defense is where a defendant admits the facts alleged in the plaintiff's complaint but points to the existence of a defense that absolves him of responsibility. If the debtor does not raise the statute of limitations in a timely manner, he will lose protection.