15 FAQ’s about Statute of Limitations, Debt Collection, and Credit Reporting

1) What is the statute of limitations?

It’s the time period in which a plaintiff has the legal right to sue. It starts from the date of your missed minimum payment. If a collector sues within that time, the statute of limitations STOPS. Collectors sometimes still sue outside of the statute of limitations, and it’s your job to raise the defense at that point.

In New York, the three primary statutes of limitations in debt-collection cases:

1. Breach of Contract: 3 years. It begins to run when you miss a minimum payment. Effective April 7, 2022: The statute of limitations for consumer-credit transactions has been reduced to 3 years per CPLR § 214-i.  For our recent blog about this shortened statute of limitations per the Consumer Credit Fairness Act, see 5 Powerful Lawsuit Defenses for New York Debtors in 2022. 
2. Account Stated: 3 years. It begins to run from your last purchase or payment.
3. Single purchase of goods (Account Stated): 4 years. It begins to run from your last purchase or payment. Uniform Commercial Code § 156. This law applies to sales of goods purchased on store credit like furniture stores and electronic stores.
4. Medical Debt: 3 years. It begins to run from the date of treatment. CPLR § 213-d.

In New York, the law is contained in CPLR § 213.[1] For the statute of limitations in all states, see this chart. If and when a collector secures a judgment, a new (often different) time limitation to enforce it applies.

2) What is the purpose of the statute of limitations?

It prevents courts from hearing stale, unreliable evidence. It encourages prompt action and prevents unfair prejudice.

3) What can my credit report tell me about the statute of limitations?

You can confirm your default date using your credit report. The default date (30 days after your last payment) triggers the statute of limitations. This answer can change depending on your state and debt type. The “30,” “60,” or “90” represents the number of days the account is in default.

****Note: Judgments (especially old ones) will not appear on your credit reports. But legally, judgments acquire a new time limitation to be enforced. In New York, judgments are enforceable for 20 years upon entry. Consumers often assume that since they don’t see an old debt or an old judgment or their credit report—then the debts or judgments are not valid. Unfortunately, that is a bad assumption. We fight some judgments that are sometimes over 20 years old.

4) How long do debts stay on my credit report?

Late payments can stay on your report for seven years from the original delinquency. Collection accounts can remain on your credit report for seven years and 180 days from the day of the original delinquency. Worth noting is that negative accounts remain present for 7 years while positive accounts can remain present indefinitely even after closed or paid in full. Win for the consumer!

5) What is the date that triggers the statute of limitations for credit card debt?

The date you defaulted for legal purposes. While a “default” is spelled out in your credit agreement, defaults and the statute of limitations are widely known as follows.

In New York:

***Update: Effective April 7, 2022: The statute of limitations for consumer-credit transactions has been reduced to 3 years per CPLR § 214-i.

1. Breach of Contract: 3 years. It begins to run when you miss a minimum payment.
2. Account Stated: 3 years. It begins to run from your last purchase or payment.
3. Single purchase of goods (Account Stated): 4 years from last purchase or payment. Uniform Commercial Code § 156. This law applies sales of goods purchased on store credit like furniture stores and electronic stores.

See the chart below for your state’s statute of limitations.

6) Do civil judgments appear on my credit report?

No, not since July 1, 2017. This date is when Experian, Equifax, and TransUnion decided to exclude from credit reports almost all civil judgments, and up to 50% of tax liens. It was a measure designed to prevent the mixing of credit files. Since judgments (and tax liens) do not include dates of birth and social security numbers, they were being attached to the wrong person too easily.

Here’s more detail about this legal development in a treatise written by my favorite consumer lawyers—the National Consumer Law Center!

But keep in mind, judgments and tax liens are still public record, and still impact your ability to qualify for credit or loans.

7) Do I still owe a debt that is past the statute of limitations?

Yes, you technically still owe it. But the collector just can’t sue you for it. Let me modify that. A collector may still sue you, but you now have an “absolute defense” and can countersue for violating the Fair Debt Collection Practices Act. But generally, collection activity is still allowed with certain disclaimers. Whether or not you want to pay it after the statute of limitations is a personal decision. Some feel a moral compulsion to pay. Others do not. But understand that partial payment of the debt will revive it (re-age) so as to re-start the statute of limitations.

8) Is debt collection still allowed after the statute of limitations?

Yes. But collectors need to disclose this fact in written communications (in most states) and must affirm it orally if asked about it. Always ask (orally and in writing) that the collector prove the date of the last payment.

For some practical advice about responding to collection attempts beyond the statute of limitations, see How long can a debt collector pursue old debt? The publisher of that article, Bankrate, Inc., approached our firm to ensure that our clients receive helpful, consumer-finance tools.

9) What should I do if a debt is past the statute of limitations?

First, know the difference between the statute of limitations to sue and the time allowed to report on credit (seven years). Debts that are stale for credit reporting may not be for legal action, and vice versa.

Secondly, request “verification” (a/k/a “validation”) of the debt. This means that you send a written letter (within 30 days of demand) to obtain basic information about the law. The collector is required to provide verification before seeking collection further. If it fails to do so, it violates federal law (FDCPA) forming the basis of possible statutory damages. Unfortunately, debts get bounced between different collection agencies after consumers demand verification. This may force you to send multiple verification demands. The law is conflicting as to whether or not actual notice of a consumer’s dispute is imputed from one collector to another.

Here are good tailored, dispute letters (in Word format) provided by the Consumer Financial Protection Bureau.

10) Does paying an old (time-barred) debt “re-age” the debt on my credit report?

Yes. Re-aging debt means that you revive it for statute-of-limitations purposes. Making a payment on a debt or acknowledging it in writing will re-age the debt. Re-aging the debt permits the collector to continue collecting, and to also file an otherwise time-barred lawsuit against you.

***Update: Effective April 7, 2022: In consumer-credit transactions, partial payment of the debt—or acknowledgment of the debt—after 3 years does not revive or extend the statute of limitations; The lawsuit must be brought within 3 years of the default to be considered timely under CPLR § 214-i.

11) Is the New York statute of limitations extended due to the Covid-19 (Coronavirus) pandemic?

Through Executive Order No. 202.8,[2] which was extended seven times through follow-up Executive Orders, Governor Cuomo “tolled” all limitations’ periods from March 20, 2020 to November 3, 2020. Although there is some debate as to whether this extension was a “toll” (adds corresponding time to the deadline) versus a “suspension” (extends the deadline date only), treat it like a suspension to err on the side of caution.

12) How do I raise the statute of limitations defense if I’m sued?

In response to a lawsuit (summons and complaint), you’d raise statute of limitations in your answer as an affirmative defense, as grounds for a motion to dismiss, or through a summary judgment motion before trial. For any credit card governed by a three-year statute of limitations (Chase, BofA, Discover, or Barclays), push on this defense hard.

13) How do I know which statute of limitations applies?

Check the chart for your state and debt type. In New York, six years is the statute of limitations for breach of contract and account stated theories (the two main legal theories).

14) Which banks have the shorter, three-year statute of limitations?

Surprisingly, Chase, Bank of America, Discover, and Barclays use credit-card agreements that select a shorter, three-year statute of limitations under Delaware law. Other banks, such as Citibank and Wells Fargo select South Dakota law, which is governed by a six-year statute of limitations.

Further, keep in mind that in New York, we have the “borrowing statute” CPLR § 202:

An action based upon a cause of action accruing without the state cannot be commenced after the expiration of the time limited by the laws of either the state or the place without the state where the cause of action accrued, except that where the cause of action accrued in favor of a resident of the state the time limited by the laws of the state shall apply. CPLR § 202

Stated another way, CPLR § 202 binds nonresident banks and debt buyers to their home-state statute of limitations 1)if shorter than New York’s 6 years; and 2) if that’s where the cause of action accrued. The cause of action accrues where “economic injury” occurs from an alleged default. The pivotal case in New York is Portfolio Recovery Associates v. King that bound Portfolio Recover Associates, an assignee debt buyer of Discover Bank, to a three-year statute of limitations since Discover suffered its economic injury in Delaware.

15) Will payment of the debt expunge the negative mark from my credit (“pay for delete”)?

No, not usually. Although some debt buyers agree to delete collection accounts as part of settlements, trends in credit scoring models show that paid collection accounts are becoming increasingly irrelevant.

Also, original creditors like banks frown on such “deals” since they violate the accuracy mandates of the Fair Credit Reporting Act. In litigation, the plaintiff’s lawyers (in my experience) never agree to pay-for-deletions in lawsuits brought by original creditors. As an alternative, you can dispute reporting errors and stale marks, request verification under the FDCPA, or wait for the negative mark to fall off.

16) What are some great books about money management?

Ok, this is unrelated to the statute of limitations. But it's an extra. Here are 10 Phenomenal Books for the Money Conscious. One of those books was written by Dave Ramsey, and his blog recommends much of the same advice given here.

As always, contact us anytime you have questions.

For information about the recently enacted Consumer Credit Fairness Act, click this link or the below graphic:

 

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[1] CPLR § 213. Actions to be commenced within six years: where not otherwise provided for; on contract; on sealed instrument; on bond or note, and mortgage upon real property; by state based on misappropriation of public property; based on mistake; by corporation against director, officer or stockholder; based on fraud

The following actions must be commenced within six years:

1. an action for which no limitation is specifically prescribed by law;

2. an action upon a contractual obligation or liability, express or implied, except as provided in section two hundred thirteen-a of this article or article 2 of the uniform commercial code or article 36-B of the general business law;

3. an action upon a sealed instrument;

4. an action upon a bond or note, the payment of which is secured by a mortgage upon real property, or upon a bond or note and mortgage so secured, or upon a mortgage of real property, or any interest therein;

5. an action by the state based upon the spoliation or other misappropriation of public property; the time within which the action must be commenced shall be computed from discovery by the state of the facts relied upon;

6. an action based upon mistake;

7. an action by or on behalf of a corporation against a present or former director, officer or stockholder for an accounting, or to procure a judgment on the ground of fraud, or to enforce a liability, penalty or forfeiture, or to recover damages for waste or for an injury to property or for an accounting in conjunction therewith.

8. an action based upon fraud; the time within which the action must be commenced shall be the greater of six years from the date the cause of action accrued or two years from the time the plaintiff or the person under whom the plaintiff claims discovered the fraud, or could with reasonable diligence have discovered it.

9. an action by the attorney general pursuant to article twenty-three-A of the general business law or subdivision twelve of section sixty-three of the executive law.

CPLR 213

[2] Executive Order No. 202.8 (based on a declaration of disaster): “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding, as prescribed by the procedural laws of the state, including but not limited to the criminal procedure law, the family court act, the civil practice law and rules, the court of claims act, the surrogate’s court procedure act, and the uniform court acts, or by any other statute, local law, ordinance, order, rule, or regulation, or part thereof, is hereby tolled from the date of this executive order until April 19, 2020…”