Statute of Limitations on Debt

[20man]

My wife and I moved to New Mexico from California about 6 years ago.
She had a bad credit card debt from well before we ever met and one day
our Bank of America checking account was frozen by a legal order. When
we called B of A they gave us the number to the California Sheriffs department
who said that, first of all, they had sent out a notice that this was going to happen
(we didn't get the notice until a few days after) and that we simply had to
pay the debt. I said "It's well over 7 years old and not even on her credit
report any more, isn't it past the time that we'd have to pay it?" and I was
told "No, this debt could be 50 years old and she still has to pay it. It's
just a matter of whether the people who own the debt choose to pursue it."
We went ahead and paid it because we needed to have access to our account
and I believed what the sherriffs told me.

I'm posting on here because I just saw something online about a statute
of limitations on collections which is what I always believed was the case.
Was I completely fooled by these people? If anyone knows one way or
the other, please let me know. Thanks!

 

[Zigner]

My wife and I moved to New Mexico from California about 6 years ago.
She had a bad credit card debt from well before we ever met and one day
our Bank of America checking account was frozen by a legal order. When
we called B of A they gave us the number to the California Sheriffs department
who said that, first of all, they had sent out a notice that this was going to happen
(we didn't get the notice until a few days after) and that we simply had to
pay the debt. I said "It's well over 7 years old and not even on her credit
report any more, isn't it past the time that we'd have to pay it?" and I was
told "No, this debt could be 50 years old and she still has to pay it. It's
just a matter of whether the people who own the debt choose to pursue it."
We went ahead and paid it because we needed to have access to our account
and I believed what the sherriffs told me.

I'm posting on here because I just saw something online about a statute
of limitations on collections which is what I always believed was the case.
Was I completely fooled by these people? If anyone knows one way or
the other, please let me know. Thanks!

For the account to have been frozen, there must have been a judgment against your wife. The time limits on judgments are much longer than on the original debt involved. Whether or not it's on the credit report is irrelevant. As for the notice...of course they didn't give notice BEFORE the money was seized, that would just be silly.

 

[single317dad]

SoL on collection of judgments in NM is 14 years:

http://law.justia.com/codes/new-mexico/2009/chapter-37/article-1/section-37-1-2

They were even gracious enough to codify enforcement of judgments from courts in other states. Was the original judgment in NM, CA, or another state?

37-1-2. Judgments.
Actions founded upon any judgment of any court of the state may be brought within fourteen years from the date of the judgment, and not afterward. Actions founded upon any judgment of any court of record of any other state or territory of the United States, or of the federal courts, may be brought within the applicable period of limitation within that jurisdiction, not to exceed fourteen years from the date of the judgment, and not afterward.

 

[Heir7]

It would be interesting to know when and where they sued you.

My guess is that they sued you in California and you did not even know they had sued you, and since you did not respond to the lawsuit they got a default judgment against you, and then they probably domesticated the judgment in your new state and then garnished your checking account.

What's strange is that your credit report did not pick up the judgment against you. So you had no warning about this impending action from them.


To clarify, there are 3 different statutes of limitations.

1. There is a state statute of limitations on how much time can pass between the day your account goes into default and the day they file a lawsuit against you. In California, they have 4 years from the date of first delinquency (first missed payment) to sue you. But this is what is called an Affirmative Defense. That means you must raise the statute of limitations as your defense against the time-barred lawsuit when you file a written answer to their lawsuit with the court. If you fail the raise that affirmative defense, then it is waived. In this case you didn't know about the lawsuit so you couldn't raise it. This is the reason that simply running and hiding from old debts does very little good. In most cases they will eventually find you anyways, and in the meantime, they go ahead and sue you and win. One of the people I know actually sends them letters with his new address and new phone number when he moves, so that they won't have the excuse of not knowing how to contact him if they did decide to sue him, so he would have known they were about to sue him and he could then take the appropriate actions to prepare.

Another thing you can do if you are worried that someone might have sued you at your old address is to search your old area's court websites for your name. Just do an internet search for your old county's court case records. You can also search adjacent counties. It would at least give you some warning that you are being sued at your old address.

2. There is a federal limit of 7 years on how long a delinquent account can be reported on your credit reports. So, about 7 years after your first missed payment, the negative account will be removed from your credit reports. This has nothing to do with how long they have to sue you, nor how long they have to collect a judgment.

3. There is a separate state statute of limitations on how long they have to collect a judgment. It varies widely from state to state. In some states they can be renewed indefinitely, so the only way out of them is to either pay them or file bankruptcy and get them discharged.

If you had known they were suing you and that they were going to end up freezing your checking account, what would you have done about it? Would it have helped you prepare for it?

 

[Zigner]

The SoL for CA would likely have tolled when they left the state...

 

[20man]

Thank you all very much for your responses.

I believe the judgment was in California. I know the notice of it was sent to a California address and since it arrived in the mail after the account was frozen, I didn't really pay too much attention to it since the damage was already done.

Heir7, I'm guessing that you're correct that any chance we had of them dismissing this due to a time limit would have depended on us knowing about it and being able to respond!

I wish I had known about it in advance so I could have maybe gotten this dismissed, but since we didn't know and the judgment they got was valid I guess that paying was our only option.

 

[Zigner]

Thank you all very much for your responses.

I believe the judgment was in California. I know the notice of it was sent to a California address and since it arrived in the mail after the account was frozen, I didn't really pay too much attention to it since the damage was already done.

Heir7, I'm guessing that you're correct that any chance we had of them dismissing this due to a time limit would have depended on us knowing about it and being able to respond!

I wish I had known about it in advance so I could have maybe gotten this dismissed, but since we didn't know and the judgment they got was valid I guess that paying was our only option.

You wouldn't have gotten it dismissed. The clock stopped when the debtor left the state.

 

[20man]

You wouldn't have gotten it dismissed. The clock stopped when the debtor left the state.

So when you leave the state it freezes things where they are? I guess that's to discourage you from running away from the debt.

 

[Zigner]

So when you leave the state it freezes things where they are? I guess that's to discourage you from running away from the debt.

In a nutshell, yep. There are, of course, more subtleties to it than that.

 

[Mark Maroon]

You wouldn't have gotten it dismissed. The clock stopped when the debtor left the state.

Zinger, can you explain? I must be missing something. I don't know of any clock that stops, or anything that get's frozen, just because you move out of state.

In order for there to be a valid judgment against the defendant there has to be proper service of the defendant. There is no statute of limitations on contesting proper service. If the defendant believes that they were not properly served they could have at any time contested any garnishment based on a lack of service of the original complaint. That's not to say they would win that argument, but I don't see what their moving out of state has to do with anything, especially an argument about lack of service of the original complaint.

 

[justalayman]

I didn't see where the op actually stated there was a judgment. While I suspect there was, it is sometimes possible to freeze a bank account as a protective action in conjunction with filing a suit. I don't see it very often but I have seen it happen.

If that was the case here, or anywhere else for that matter, the owner of the seized account, if they wish to contest the seizure, would have to address the court that issued the seizure order.



And what the op was told about the debt never disappearing is generally true. The statute of limitations means the courts cannot be used to collect the debt. It does nothing to cancel the debt itself.

 

[single317dad]

Zinger, can you explain? I must be missing something. I don't know of any clock that stops, or anything that get's frozen, just because you move out of state.

In order for there to be a valid judgment against the defendant there has to be proper service of the defendant. There is no statute of limitations on contesting proper service. If the defendant believes that they were not properly served they could have at any time contested any garnishment based on a lack of service of the original complaint. That's not to say they would win that argument, but I don't see what their moving out of state has to do with anything, especially an argument about lack of service of the original complaint.

Here's some detailed information about tolling from a jury instruction form:

https://www.justia.com/trials-litigation/docs/caci/400/457.html

And some discussion from the CA courts:

http://www.courts.ca.gov/9618.htm

Sometimes the statute of limitations is suspended (“tolled”) for a period of time, and then begins to run again. For example, tolling may happen when the defendant is a minor, is out of the state or in prison, or is insane. When the reason for the tolling ends (like if the minor turns 18, or the defendant returns to California or gets out of prison, or the defendant is no longer insane), the statute of limitations begins to run again.