What is tolling, you ask? To understand what tolling is you first need to understand how statutes of limitation operate. Every debt and every other civil cause of action has time limits within which the action must be filed. This period is the statute of limitations and it can vary by the type of action and by states. Most commonly, the statute of limitations for credit card debt ranges from three (3) to seven (7) years in most states. To check your state, here is a link to a handy website: http://www.creditcards.com/credit-card-news/credit-card-state-statute-limitations-1282.php. Of course, you should always consult an attorney licensed to practice law in your state because statutes do not always tell the whole story. Caselaw sometimes interprets the statutes. A case in point is Georgia. Georgia has both a four (4) and a six (6) year statute of limitations and just by reading the statutes, a person might think the four (4)-year statute applied. However, the person would be wrong because caselaw in Georgia has determined that the six (6) year statute applies.
Tolling comes into play by stopping or “tolling” the statue of limitations such that it does not continue to run. Tolling is illustrated by the case of Avery v. First Resolution Management Corp., No. 07-35726, 2009 WL 861727 (9th Cir. April 2, 2009) (here is a link to the case: http://caselaw.findlaw.com/us-9th-circuit/1405450.html) . In Avery, the Ninth Circuit Court of Appeals found that a debt was not time-barred and that the law firm representing a junk debt buyer did not violate the FDCPA by filing suit to collect the debt. To understand the case, it is necessary to go into the facts. The debtor in that case lived in Oregon at all times. However, when the debtor applied for the credit card, the agreement provided that it would be governed by New Hampshire law. The debtor ultimately defaulted on the debt and the debt buyer filed suit long after the New Hampshire statute of limitations had expired. However, because the credit card agreement was governed by New Hampshire law, the “tolling” provisions provided that the statute of limitations did not begin to run while the debtor was absent from and residing out of the state at the time the cause of action arose. Therefore, the lawsuit on the debt was timely even though the debt was over 5 years old at the time it was brought because the New Hampshire statute of limitations never began to even run. Absurd result, because the debtor never even lived in New Hampshire.
What does this mean to you? Each state is different and thankfully has different tolling provisions from those at issue in Avery. When a debtor receives a letter from a debt collector on a debt which the debtor believes to be barred by the statute of limitations, don’t ignore the letter. Dispute the debt immediately by sending a certified letter to the debt collector telling the debt collector that the debt may be barred by the statute of limitations. If the debt collector sends a validation indicating a more recent date than the date of last payment, have the validation reviewed by an attorney to ensure that it comports with the law. Get the attorney to advise you on the state statute of limitations and any tolling provisions, if applicable, to make sure that the debt can still be sued upon.
A further tip is that the statute of limitations is only a defense that applies in court. And while the law is different in some states, the defense is waivable. What does this mean? It means that even if a debt is time-barred, you can be still be sued. And if you are sued on an old debt, unless you file an answer with the court raising the statute of limitations, its waived. Bottom line, do not think that a dispute letter sent to a debt collector will protect you from any future lawsuits. Know your rights and take steps to protect yourself.
Copyright (c) 2012 & 2014 by Rachel Lea Hunter
www.rachelhunterlaw.com
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