Statutes of limitations may be a complete defense against a debt collection lawsuit, but you must be sure you know what statute applies, and when the limitations period starts to run before you can determine if the defense will work for you. Since statutes of limitations are a matter of state law, and vary as to subject matter, be aware that we speak here about New York debt collection actions only.
A statute of limitations limits the number of years that a creditor can sue you for a debt. (But note it does not limit the number of years a debt collector can contact you). In New York, the statute of limitations on credit card debts is, generally speaking, six years. (See New York CPLR § 213). But, for auto loans, and store credit cards, such as Macy's or Sears cards, the statute of limitations is four years. (See New York UCC § 2-725).
And to further complicate things, in 2010, New York's highest court, the Court of Appeals, in a case called Portfolio Recovery Associates, LLC v King, held that the statute of limitations of the state where the credit card issuer is based, rather than New York's statute, may be correct statute of limitations to apply, if that statute is shorter than New York's. New York generally has a six-year statute of limitations on credit card debt, but it also has a law that states that creditors cannot take advantage of New York's six-year statute if their own state has a shorter one. (See New York CPLR § 202). The cite for the Portfolio Recovery Associates case is 14 NY3d 410, 901 NYS2d 575 [2010].
So the first thing you will want to do is find out the creditor's principal place of business. In a properly pled complaint, such information is stated in the first couple paragraphs. If not, you may find it on the internet. For publicly traded companies, the best source for this information is a company's public filings, also called SEC filings. You will notice that many big banks, such as Chase, Bank of America and Discover, are all incorporated in Delaware, which has a three year statute of limitations. If you are sued by a debt buyer, as was the case in Portfolio Recovery Associates, the same reasoning applies; you still look to the home state of the issuing creditor.
The time limit begins to run from the date of default, which is usually considered to be 30 days after the last payment on the account. Sometimes debt collectors will call debtors to try to convince them to make a payment on an account with an expired statute of limitations. Why? Because an expired statute of limitations can be re-started if you make a payment, so don't fall for this trick if you get a call out of the blue from a debt collector.
It is also important to be aware that if a creditor files suit against you, the statute of limitations is tolled – that is, it stops running – as of the time the suit is filed.