What is a statute of limitations? What does it mean for debt collection?
A statute of limitations is a federal or state law that restricts the time within which legal proceedings may be brought. In simpler terms, it’s the time limit on when you can be sued on a debt.
Figuring out the statute of limitations on a particular debt can be confusing. There are a couple of questions that you need to answer before you can know for sure.
First, what type of debt is it? Most states have different time limits depending on the type of debt. Others utilize limitations set for written contracts in general. For example, in West Virginia, the statute of limitations on a credit card is governed by the 10-year statute of limitations set for a written contract. However, other states, like South Dakota, have specific limitations set for revolving or credit card debt. In South Dakota, it’s 6 years for a credit card. So the first step is to determine what type of debt we’re talking about? Usually that is going to fall into two or three categories:
1) Revolving or credit card debt
2) Installment loans like car loans or furniture loans
3) Mortgage or home loans
Second, which law applies? This is the second question that you have to answer and it may not be that easy to figure out. The state where you live may not be the law that governs the contract. For example, just because you live in West Virginia or Pennsylvania, that may not be the law that applies. Your contract with the lender or credit card company likely has a “Choice of Law” clause in it. For most credit card agreements, Delaware, South Dakota and Utah are popular choices. For most mortgage loans, it will be the state where the property is located.
For credit card debt, getting a copy of the card agreement can be an adventure. Chances are, you signed up for your card over the phone or at a retail store. You should have received a copy of the agreement in the mail at some point. You would also have received a copy of any amendments or changes. If you don’t have a copy, like most of us, you can check the credit card companies website and print off a copy of the most recent agreement. The contract should have a choice of law clause.
What happens now? If a debt is beyond the statute of limitations, you cannot be sued or taken to court. This means that you are safe from wage garnishment, bank levy etc. It also means that a debt collector cannot threaten you with a suit or garnishment. If they do, then they could be liable to you for damages under state or federal law.
If you’ve been contacted by a debt collection company and you’re not sure if the statute of limitations has passed, contact a consumer protection lawyer in your state. If you live in West Virginia or Pennsylvania, call the attorneys at Hinkle Law, PLLC. We love to fight with debt collectors.