There is a lot of confusion in Consumer circles about this vital topic so let's try to clear the air. First of all there are TWO different Statutes of Limitations - The Statute of Limitations on Collections (SOLC) and the Time Limit on Reporting (TLR). There is ONE TLR since it is determined by the Federal Fair Credit Reporting Act. There are 51 SOLC's (one for each state plus DC).
Fair Credit Reporting Act Section 605(a)(4) limits the reporting of derogatory information to 7 years. Before 1997 creditors could manipulate that date by deciding not to charge off an account for years reporting it as a 180 day account then charging it off and starting the 7 year clock all over again. The 1996 amendments to FCRA changed that by inserting Section 623(a)(5) which sets by law the concept that FCRA reporting time must begin with the date the first payment was missed that led to the delinquency being reported and that the creditor must report it within 180 days of that date. The 180th date therefore becomes the Statutory Charge Off Date. That is the maximum that a creditor can extend the 7 years. Should the creditor charge the account off before the 180 days after the first missed payment then the actual charge off date becomes the beginning of the 7 year reporting period. Should the creditor choose not to charge the account off for several years then for FCRA reporting purposes the 7 years begins 180 days after the FIRST missed payment that led to the delinquency. I refer you to the Amason letter (http://www.ftc.gov/os/statutes/fcra/amason.htm
) for a more complete discussion of this. While FTC Staff Opinion Letters are not binding on even the FTC they do present very carefully researched insight into the issues at law and the reasoning behind them.
Since Congress has determined the starting date of the 7 year reporting period by law that date becomes a Date-Certain meaning that no action by the creditor can legally change it. Collectors will routinely say they can change it and taking the Lopresti letter ( http://www.ftc.gov/os/statutes/fdcpa/letters/lopresti.htm
) at face value the collector can legally TELL you they can change the Date-Certain but they legally cannot DO it. The Status Date (or Date-Certain) remains with the account unchanged no matter how many times the account is bought and sold. Changing the Status Date is called re-aging and is a FCRA violation. I would like to point out that telling you they can change the Date-Certain would be IMHO a violation of FDCPA Section 807 prohibitions about false and misleading statements.
The Statute of Limitations on Collection is a much murkier topic since there are really 51 different laws to examine. I will be talking in generalities here so I encourage you to spend the time to determine the exact laws in your state. In all instances I am referring to debts that have NOT been reduced to Judgement. Judgements have their own SOLC which in almost all cases is MUCH longer than SOLC as discussed here.
The purpose of SOLC is to comply with the 4th Amendment right to a speedy trial. Some states allow a very long SOLC (I believe Rhode Island can go up to 20 years) so this is problematical. Some states (like Massachusetts) toll or suspend SOLC while the defendant is located outside the state.
As a general rule consumers must be sued in the State Courts of the state in which they reside at the time of the suit. Except as allowed by specific laws like Fair Credit Reporting Act or Fair Debt Collection Practices Act) suits between citizens of different states brought in Federal Court must exceed $75 000 (28 USC 1332). Below that amount the matter is delegated to State Courts.
The contract you signed may state that it will be interpreted under the laws of a certain state or that any suit or controversy must be decided in the Courts of a certain State. If that language is present it will be honored. If it is not then the matter will be decided in the Defendant's state of residence at the time suit is commenced. Some states have "Long Arm" statutes similar to Arizona's which reads: (edited to eliminate the unnecessary provisions)
No person shall be sued out of the county in which such person resides except:
1. When a defendant or all of several defendants reside without the state or their residence is unknown the action may be brought in the county in which the plaintiff resides.
4. Persons who have contracted a debt or obligation in one county and thereafter remove to another county may be sued in either county.
6. Persons who have contracted a debt or obligation without the state may be sued in any county in which found.
7. When there are several defendants residing in different counties action may be brought in the county in which any of the defendants reside.
This language is typical. Generally you must be sued in the county in which you reside at the time of the suit but see #1 - this is the "Long Arm" statute wherein the Plaintiff's County is the proper venue.
Now that we have established that a suit CAN be brought and where now comes the question of "when".
There are several sites on the Internet that list the various states' Statute of Limitations. Debtprboards has provided a ;ink to them in the "Laws" section. The SOLC generally begins with each payment that is made. Each payment whether timely or late re-starts SOLC. This is the critical concept in understanding SOLC because when you default the last payment made is where SOLC is counted from. Here in Arizona SOLC generally is 4 years. If a creditor has not commenced suit within that time frame the Statute of Limitations does not BAR a suit but it becomes an Affirmative Defense against the suit.
Many states have provisions in their laws that suspend (or Tolls) the SOLC while the Defendant is outside the state. Arizona's is typical:
A.R.S 12-501. Effect of absence from state
When a person against whom there is a cause of action is without the state at the time the cause of action accrues or at any time during which the action might have been maintained such action may be brought against the person after his return to the state. The time of such person's absence shall not be counted or taken as a part of the time limited by the provisions of this chapter.
This is obviously intended to protect the creditor from someone who leaves the State to avoid paying bills but has intent to return (and in fact has not relocated just fled). Few of us do that. Most of us move from one state to another without intention to return. Arizona has a law that addresses that event:
A.R.S. 12-507. Action against person removing to this state
No demand against a person who removes to this state incurred prior to his removal shall be barred by the statute of limitation until he has resided in this state one year unless barred at the time of his removal to this state by the laws of the state or country from which he migrated.
This is why I can say generally that the SOLC of your resident State (or your previous resident state if time-barred in that state by SOLC) is what prevails. Remember - any payment or in some states even a promise of payment re-starts SOLC. Also keep in mind that bringing a suit or threatening to bringa suit on a time-barred debt is a FDCPA violation all by itself. Therefore it is automatically an AFFIRMATIVE DEFENSE of the time barred savings of law and a Counterclaim for Statutory Damages and Attorney Fees under FDCPA.
Another event that may re-start SOLC is filing BANKRUPTCY. While the SOLC window to file suit in this instance is small (in Indiana it's 30 days) a DISMISSED BANKRUPTCY can in some states give creditors whose debts were time-barred under SOLC before filing Bankruptcy another chance to sue you. Here's a link that lists SOME states and their SOL and Extenders: http://www.ncfsi.com/statute_of_limitations.htm
In the event that a creditor with an Out-of-SOLC debt files suit it is absolutely imperative that the defendant file an Answer asserting that the action is time-barred by SOLC in that state. While I am not an attorney I would recommend wording similar to this:
AS A FIRST AFFIRMATIVE DEFENSE Defendant denies each and every allegation made by Plaintiff in the complaint; (this is a General Denial)
AS A SECOND AFFIRMATIVE DEFENSE Defendant alleges that this action is time-barred under section XXXX of the laws of the State of XXX (obviously you will have to look up the section of law for your State. Most are on the Internet.)
If you do NOT do this the creditor will probably get a Judgement against you even though the debt is time-barred. YOU MUST RAISE THE ISSUE - they won't and the Court doesn't know. It is highly unlikely you will be able to have the Judgement vacated later on SOLC basis if you were properly served and didn't respond.