A statute of limitations is a time limit. It sets a deadline for a creditor to begin a lawsuit. If the creditor does not begin the lawsuit before the deadline, the debtor can raise an affirmative defense of a Statute of Limitations to the lawsuit. That is, the debtor can bascially say to the court,
“Yeah, I used the credit card, but this creditor waited too long to begin the lawsuit, so please enter a judgment in my favor that says I do not owe the money.”
It may be surprising to you that you can admit that you used the credit card, and still avoid a judgment against you, but it is true. This is because the law does not favor those who “sit” on their rights. After the passage of too much time, evidence gets lost or destroyed, witnesses move away or die, and memories fade. All of these factors make it more difficult for a court to determine the truth, thus the justification for a Statute of Limitations.
A deadline set by a Statute of Limitaions is generally determined by state law. The choice of which state’s law will be used to set the deadline is determined by the agreement or contract between the creditor and the debtor. If the contract between the parties is silent, the court will generally apply the state’s law where lawsuit is brought.
Different states have different statutes of limitations for the same type of lawsuit. For example, in Florida the deadline to bring an action founded on a written contract is five years. But Delaware’s Statute of Limitations establishes just a three year deadline. Interestingly enough, some credit card companies’ credit ard agreements call for the law of Delaware to apply. So, even if they sue you in Florida, the court wiill apply Delaware three year deadline, not Florida’s five year time limit.
Statutes of Limitations are important in bankruptcy, because many creditors will assert claims in bankruptcy even after the deadline has passed, and there are many situations where a debtor needs to be able to object to a creditor’s claim in bankruptcy. The expiration of a Statute of Limitations is just one basis that an experienced bankruptcy attorney will use to knock out a creditor’s stale claim.
Statutes of limitations are important outside bankruptcy (in state court) as well. Florida’s five year Statute of Limitation applies to promissory notes, mortgages and foreclsoures just as it does to credit card agreements. For more information on defense of mortgage foreclosure visit this page on my firm’s website: Foreclosure
For more information on credit card topics, visit my firm’s Credit Card Archive in our Blog: Credit Cards
Before you decide, ask us to send you free, written information about Miami bankruptcy lawyer, James Schwitalla, P.A, and our firm. We are a debt relief agency.