The statute of limitations (SOL) on debt is an important weapon in your arsenal against collection firms who are trying to sue you for a debt. The simplistic definition of SOL is this: the amount of time from date of last activity that a person or company has to sue you. Each state has its own laws regulating the length of time.

But let’s say you lived in California, defaulted on a credit card, and then moved to Florida?. The collection agency currently handling the account decides to sue you in Florida. Which SOL do you use? In general, if a person or company sues you for a bad debt, the statute of limitations used is the current state in which you live, regardless of where the debt was incurred. But there are exceptions:

• Borrowing Statute A state statute specifying the circumstances when the statute of limitations of another state will be applied to in-state lawsuits whose cause of action arose in the other state
• Statute of Limitation was Run Before the Move. If, in the example given above, the debtor moved to Florida after California’s 4 year SOL had passed, the California SOL would apply even though the debtor was in Florida, which has a 5 year SOL.
• Reverse Borrowing. Statute similar to Oregon’s that applies the current state’s SOL when the old state’s SOL would be too short or too long.
• “Choice of Law” state applying the SOL of the situs that governs the contract. Whether the choice of law provision in the contract creates an ambiguity about which state’s SOL should apply that should be resolved against the drafter (the creditor) to give the debtor the benefit of the shortest one in the mix.
• “Conflict of Laws” principles. The court has to make a determination whether which of the competing state’s laws are to be applied to resolve the dispute.
• “Comity” principles – The acceptance or adoption of decisions or laws by a court of another state, based on public policy rather than legal requirements. In English, the judge may feel another state’s case law is a good guide for dealing with the current case before them, even though they are not required to consider the other state’s legal precedent or law.

It is usually possible to deduce from statutes and case law what result a court should reach. However, it is never guaranteed that any particular judge will get it right, even if shown the right path in a well reasoned memorandum of law with impeccable citations to bulletproof authority.

Have you been involved in a case where the another state’s SOL was applied rather than your current state? Tell us about it by leaving a comment!

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