Statute of Limitations for Debt in NC
What State’s Statute of Limitations Apply?
The Statute of limitations (SOL) is STATE (or civil) not federal law, so it varies from state to state. Usually, it is not clearly written and is open to some interpretation. A copy of North Carolina’s is here.
It can be the state where the loan was taken out, the state where the debtor currently lives, or the state as spelled out in the contract. Which one? The courts decides – making it tricky. Here is a list of all the states statute of limitations.
What is the Statute of Limitations?
The statute of limitations for contracts is designed to give creditors ample time to sue a debtor for breach of contract while providing a time limit. This does not mean you cannot be sued after the statute of limitations expires, only that it is an effective affirmative defense. The DEBTOR MUST bring this defense up in court. People get sued all the time after the statute of limitations because people rarely respond. This is a good reason to read ALL your mail!
The statute for contracts, oral, written and unwritten is three years, contracts for sale of goods is five years, and contracts “under seal” can be extended to ten years. This means, after three to ten years from the date of the last delinquency when the contract is breached the debt is said to be “time-barred” and the statute of limitations becomes is a VERY effective affirmative defense to a lawsuit when used properly.
The Confusing Statute of Limitations
- The statute has NOTHING to do with the reporting on credit reports. This is governed by the FEDERAL Fair Credit Reporting Act
- This DOES NOT mean it can be used to force debt off your credit reports – those are good for 7 years (tax liens 10 years).
- This DOES NOT mean they cannot try to collect the debt, only they can’t win a lawsuit where it is used properly in an affirmative defense.
- Federal debt, such as federal taxes, and most state taxes are NOT subject to state statute of limitations.
- A judgment means you have already been sued and lost (thus the statute of limitations does not apply). A judgment is good in NC for ten years and can be renewed indefinitely (i.e. forever).
The Statute of Limitations can be Reset
- The clock starts “three years from the LAST delinquency” or breach of contract. This means the statute of limitations is linked to payment history. –This differs from credit reporting, which is seven years on your credit report (except taxes) from the FIRST delinquency
- If you pay ONE PENNY of the debt, the clock restarts for credit collecting and the statute of limitations. By paying even one penny you are acknowledging the debt which resets the clock. Paying an old debt will actually hurt your credit, reopen collection efforts, AND reopen yourself up to a lawsuit!
- If you agree in writing, before the statute of limitations runs out, to repay the debt in part or in full , it restarts the clock on the statute of limitations.
- In North Carolina, even a VERBAL promise to pay a debt, along with a promise not to use the statute of limitations as a defense can void the defense.