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Statute of Limitations

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123212122

New member
how is statute of limitations determined? Is it by the state in which the the debt originated, or is it in the state in which a suit is started? For example debt started in Vermont which has a 3 year limitation for suit to collect on debt, or suit started after you move to another state which has a 6 year statute of limitations, which one would you go by?
 


Taxing Matters

Overtaxed Member
The statute of limitations (SOL) is determined by the law of the state in which the lawsuit is filed (assuming the complaint does not involve federal law and is not filed in federal court). Note though that the SOL statute of a state may have rules that refer to the SOL of another state if the claim or transaction arose in that other state. You typically won't see those rules explained in the many summaries of state SOL rules that you see on the internet.
 

FlyingRon

Senior Member
In addition to the very proper and succinct answer TM gave, understand there are other things that can extend the time they have to take action against you. The limitation is "tolled," that is, put on hold in certain circumstances such as you being out of the state.

Note, that you're likely wrong about the limitations period only being three years in Vermont. Vermont has a SIX year limitation on collection of debts on accounts it goes up to EIGHT years on certain written contracts. Certain promissory notes even go up to FOURTEEN years. Vermont indeed tolls the time when a person is "absent from and resides out of state." There are a few other conditions that toll the limitations in Vermont as well.
 

Litigator22

Active Member
In general, unless exceptional circumstances make such a result unreasonable, the forum will apply its own period of limitation barring a claim. (See: Restatement Conflict of Laws Section 142)

The arguments favoring the forum state's period of limitation include: stressing that each state has a substantial interesting in preventing the prosecution of claims which it deems to be stale; asserting that periods of limitations are procedural and not substantive; and because dismissing a case because of the running of the period of limitation is not a judgment on the merits and the claimant is free to file in a state having a more generous period.

But don't think that it is as cut and dried as all that as it isn't.
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For anyone interested a cogent and somewhat encompassing treatment of the subject, including interpreting of what constitutes "exceptional circumstances" and the impact of a choice of laws clause * see: In re Sterba, Debtor - PNC Bank Appellant, U. S Court of Appeals Ninth Circuit No. 14-60061, BAP No. 13-1590 http://cdn.ca9.uscourts.gov/datastore/opinions/2017/04/05/14-60061.pdf


[*] Briefly the bankrupt debtors Sterba - filing a Chapter 7 in California - had defaulted on a mortgage note (a second mortgage and $47K deficiency) with PNC Bank executed in Ohio. The Trustee denied PNC's claim contending that the applicable statute of limitations was that of California's 3-year period which had expired.

In turn PNC argued that Ohio's 6-year period of limitations should apply, which had not expired. Moreover the mortgage note contained a choice of laws clause providing that the laws of Ohio were to govern in case of default. However, and notably the contracting parties had not selected a statute of limitation.

After two appeals the court of appeals reaffirmed the bankruptcy court's ruling favoring the creditor PNC Bank - not because the laws of the California should not apply in general - not because of the choice of laws clause in the mortgage note - but because under the unique circumstances of the case applying California's 3-year period of limitation would result in an unreasonable injustice to the creditor PNC.

The unique circumstances and resulting injustice being that PNC was not at liberty to pursue its claim any where other than in the debtors' bankruptcy proceeding pending in and confined to the exclusive jurisdiction of the bankruptcy court sitting in the state of California.
 
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