The general concept of a statute of limitations is well known to the public. Most people are aware that there is a set time period after the occurrence of an injury during which you can file a lawsuit against a person for recovery of damages from that injury. The same goes for prosecution of criminal activities as well, except for murder. The statute of limitations for a particular type of lawsuit, however, changes based on the claim asserted.

Statute of Limitations

As applied to a person’s debt, the Statute of Limitations defines time periods during which a creditor has the ability to sue you in court over that debt. In North Carolina, the statute of limitations is three years for auto and installment loans, promissory notes, and credit cards. For credit card debts, the statute of limitations begins at the last date of activity on the card. This starting point is often hard to define, and it is often your word against the creditors as to the last time there was “activity” on your account. For credit cards and other contracts, the date of the breach of the contract is when the Statute of Limitations begins to run.

Once the Statute of Limitations has run on a debt, the creditor is barred from filing a lawsuit against you for that debt. However, this may not stop the creditor from filing the suit. They can still file the lawsuit in attempts to collect on the debt, so the debtor will have to raise the statute of limitations as an affirmative defense in their answer to the creditor’s claims. If the Statute of Limitations has run, then the creditor risks having its claim barred. It should also be noted that filing a lawsuit on a time-barred claim is a violation of the Fair Debt Collection Practices Act (if the plaintiff is a debt collector as defined in the Act).

After the Statute of Limitations

If the Statute of Limitations has run on your contract, debt collectors may still attempt to collect from you outside of court. In fact, they are more likely to take very aggressive tactics in doing so, because they know that the debt is unenforceable in court. It is at this point that debt collectors will try their hardest to get you to pay them anything, because: (1) they’ve probably bought the debt for pennies on the dollar and are looking to make a profit; and/or (2) payment may reset the Statute of Limitations on the debt, which creates more opportunities for them to secure payment on the debt.

Protecting Yourself

The most important piece of advice for debtors is not to say or do anything that in any way acknowledges that you owe the debt after the statute of limitations has run. This includes phone conversations with debt collectors or letters/email correspondence. Acknowledging or even making a token payment on a debt can extend or reset the statute of limitations.

The most important piece of advice for creditors is to be aware of your options and not to wait too long to take action. Once a contract has been breached, you can take the debtor to court immediately, and you should do so well before the Statute of Limitations becomes a bar to your claims.

For more information, please contact us at info@lawplusplus.com or call (919) 912-9640.