Statute of Limitations do NOT get reset by payment?

[AZGuy23]

I've always been under the impression that if you make a payment, of any size, to an old debt account, the statute of limitations would be reset.
I asked this on another forum and was told that it is not true, that the SOL goes by the DOFD (date of first delinquency) and it is not reset.

Did some digging online and it does appear to be the case. Per the Arizona Statute...

"Creditors and debt collectors have a limited time frame to initiate an action for debt (lawsuit) against debtors for nonpayment of credit card bills. That limit is set by a state’s statute of limitations. In Arizona, the statute of limitations for a contract in writing is six years after the cause of action accrues, or within six years of the date the contract went into default (Arizona Revised Statutes (A.R.S.) § 12-548)."

So the SOL starts after the action that caused the SOL to start "ticking", or the first time you missed a payment. Missing the payment, and therefore now having the account in default, starts the SOL. If you make a payment at a later date, and do not bring the account current, the SOL is not reset, as the account is still in default.

The only way to reset the SOL, from my interpretation, is to pay the account current (and therefore no longer in default). So if you have a credit card account and stopped paying in say Jan. 2007 that you owe $5,000 on (that is the action that caused the account to go into default)...didn't make any payments for 9 months (so now you owe $5,500 with late fees and interest), then made a $25 payment, the account would still be in default and therefore the SOL would not be reset. If, however, you make a payment of $500 and bring the account current, then the SOL would be reset to the next time to miss a payment again.

Am I understanding that correctly?

[justbroke]

I'd wait for someone like Despritfreya to come along and answer. It would need to be Arizona specific and what you posted is not specific enough for me to know. This does vary by State so it's a state-specific answer. From what I can tell, Arizona is like Florida and Florida doesn't allow the clock to be reset solely by payment, promise to pay, or acknowledgement of the debt.

[LadyInTheRed]

It sounds to me like you are reading the quoted text correctly.

But, here is what ARS 12-548 says:

A. An action for debt shall be commenced and prosecuted within six years after the cause of action accrues, and not afterward, if the indebtedness is evidenced by or founded on either of the following:

1. A contract in writing that is executed in this state.

2. A credit card as defined in section 13-2101, paragraph 3, subdivision (a).

B. If there is a conflict between another jurisdiction and this state relating to the statute of limitations for a debt action as described in subsection A of this section, this section applies.

So, what you quoted is assuming that the date of default is the date the cause of action accrues. They could be correct. There may be case law to back that up. I don't know. But, what if 2 years after the original default you agree to make a smaller payment than originally contracted over 10 years and in return for your resuming payments, the creditor agrees not to sue you? You continue to make the smaller payment for 5 years, then stop making payments. When did the cause of action really arise? Was it the date of the original default? Or, was the agreement to make smaller payments a new contract? I don't know the answer. But, if it is a new contract, you haven't technically restarted an SOL, but you have created a new contract to pay the original debt. So, it has the same effect as restarting the SOL.

What starts and stops the SOL varies by state. I read a lot of misinformation about SOLs. So, make sure you can trust the source of your information. The best way to know whether and how you can restart an SOL in Arizona is to consult an Arizona attorney with experience in debtor/creditor law.

[AZGuy23]

It does appear to differ state to state as evidenced here: http://www.cardhub.com/edu/statute-o...dit-card-debt/

Apparently in New Mexico, the SOL are reset by o e of these actions:

“make any payment of the debt”
“sign a paper in which you admit that you owe the debt or in which you make a new promise to pay”
“sign a paper in which you give up (“waive”) your right to stop the debt collector from suing you”

I do have a client that specialized in debt/creditor law, I will shoot him an email and see if I can get any clarification.

[despritfreya]

In Arizona, the mere payment of monies after the expiration of a statute of limitations does not extend the statute or revive the debt. This is based upon A.R.S. §12-508 (Effect of Acknowledgment On A Barred Action) which states:

“When an action is barred by limitations, no acknowledgment of the justness of the claim made subsequent to the date it became due, shall be admitted in evidence to take the action out of the operation of the law, unless the acknowledgment is in writing and signed by the party to be charged thereby.”

Case law interpreting the above, while scant, (See Cheatham v. Sahuaro Collection Service, Inc. 118 Ariz. 452, 577 P.2d 738 (Ariz. App. 1978))requires that the party acknowledge in writing the “justness” of the debt, which refers to a moral obligation to repay the original debt.

Des.

[HHM]

Perhaps, for the sake of completeness, let's fill in the picture.

What if the debtor makes a payment "before" the expiration of the SOL...would that reset the SOL. I would think it does?

[tobee43]

i agree, i also think it would. but it's clear that this varies state by state. as a debt's statute of limitations is essentially the time-clock on a dormant debt. most are of the belief that as long as that debt remains dormant, the clock continues to tick. and, again with that belief, if one should make a payment on the debt, this "reactivates" the account. it appears that some states say the debt is no longer dormant but is now active, the statute of limitations ceases to matter. my understanding again, it varies state by state and when you once again default on your payments, in those certain states, your state's statute begins all over again.

thinking about this, in some states a debtor can unintentionally reset the statute of limitations by promising to make a payment, even if he/she doesn't ever actually submit one. one would say, in a case where the state's laws allowed such a thing, the collection agency would have to provide proof that the debtor made such a promise. it can be tricky and bit scary with these terrible collection agencies when they have recorded telephone calls, etc. but the idea that they would maintain those telephone records for long enough to use them as lawsuit fodder is also a relatively sketchy concept. really, if you think about it, in some cases even talking to one of these leeches could trigger a reset of the SOL, depending on what is said during a conversation with them.

[LadyInTheRed]

thinking about this, in some states a debtor can unintentionally reset the statute of limitations by promising to make a payment, even if he/she doesn't ever actually submit one. one would say, in a case where the state's laws allowed such a thing, the collection agency would have to provide proof that the debtor made such a promise. it can be tricky and bit scary with these terrible collection agencies when they have recorded telephone calls, etc. but the idea that they would maintain those telephone records for long enough to use them as lawsuit fodder is also a relatively sketchy concept. really, if you think about it, in some cases even talking to one of these leeches could trigger a reset of the SOL, depending on what is said during a conversation with them.

I did a little research on this a while ago. I couldn't find one state where you could reset an SOL by making a verbal promise to pay. When a promise to make payment reset the SOL, it had to be in writing. I didn't do thorough research on each state's laws, but I am pretty comfortable saying that if there are states where you can reset the SOL by a verbal promise to make a payment, there aren't many.

[tobee43]

I did a little research on this a while ago. I couldn't find one state where you could reset an SOL by making a verbal promise to pay. When a promise to make payment reset the SOL, it had to be in writing. I didn't do thorough research on each state's laws, but I am pretty comfortable saying that if there are states where you can reset the SOL by a verbal promise to make a payment, there aren't many.

that's good to know! this is pretty scary stuff here. i know there are creditor friendly states, lets see how, one comes directly to my mind...ahhhhhhhhhhh nj. some of the practices i have seen there are enough to curl even the straightest of hairs.

[AZGuy23]

Yea I think verbal would be a little nuts, I mean what proof would they have? A recording? Prove it's me in the recording.

[frogger]

While a verbal agreement can be binding, it is difficult to prove and/or enforce. Mum is the word.

[tobee43]

While a verbal agreement can be binding, it is difficult to prove and/or enforce. Mum is the word.

i think? that was my point, and to be aware of any "recorded" call which may be used against you. and i guess to quote me "but the idea that they would maintain those telephone records for long enough to use them as lawsuit fodder is also a relatively sketchy concept"....at best is somewhat of my disclaimer LOL!!

point is, just be careful and as frogger points out MUM is the word