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Is There a Time Limit on Debt Collection?

Overdue Hospital Bill

Any civil action has a time limit within which a legal claim must be filed in the proper court or the claimant may be barred from pursuing any legal remedy, including payment of a debt.

In California, you must file your debt collection lawsuit within a certain time but it depends on the nature of the debt and the action you are pursuing. Most debts concern breach of a contract, oral or written, in which two parties negotiate for performance of a task or service in return for payment. The service or task could be advice, painting a house, purchasing a product or lending money. Once the service is completed and demand for payment is made but refused, the claimant may sue for breach of contract.

California imposes a 4 year time limit for bringing a breach of a written contract, and two years for breach of an oral contract. The time begins to run when the breach occurs. For example, if the contract states that payment is due on a certain date and either payment is not made that day or only partial payment is made, the statute begins to run on the day after it was due.

Modifying or Tolling the Statute of Limitations

The court does allow parties to modify the statute of limitations by shortening or extending it regardless of what the law states. Also, the statute may be tolled, or put on hold, in certain cases. Tolling applies in these cases:

  • The plaintiff is a minor
  • The defendant is not within the state
  • The plaintiff was mentally incompetent
  • The plaintiff is incarcerated
  • A voluntary agreement exists between the parties
  • There is a delay in discovery of the breach
  • A bankruptcy or injunction is filed

The statute in these cases will begin to accrue once the circumstance or “disability” has been lifted.

The Statute is an Affirmative Defense

Even though the statute of limitations may have passed on filing a lawsuit in a debt collection case, a collection agency, attorney or individual can still pursue collection and even file the suit in court. Also, it does not prevent your debt from appearing on your credit report. If you ignore a summons, the court can issue a default judgment and it is your task to overturn the judgment by appropriate court action.

Alleging that the statute of limitations bars prosecution of a debt collection case is an affirmative defense used in court filing once a case has been initiated against you. You have to raise this defense before your case is concluded or you may well lose the right to raise it on appeal. Otherwise, if you can prove that the applicable statute of limitations applies to your case, the court will dismiss the lawsuit.

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