The answer is more complicated than you might think.
Section 213 (2) of the CPLR states that the statute of limitations to commence an action upon a contractual obligation or liability, express or implied, except for residential rent overcharge, certain transactions described in the Uniform Commercial Code, or warranties on new homes, must be brought within 6 years after the cause of action accrued. This statute of limitations includes all “consumer credit transactions,” such as credit cards, and is calculated to run from the date of the last transaction (either the last credit purchase, or the last payment made, whichever occurs last in time).
New York’s highest court, the Court Appeals, has recently held that in a debt-collection law suit, if the creditor to which you originally owed the debt is located in another state, then the place where the injury occurred to the creditor is that other state. In such cases, New York’s borrowing statute, CPLR 202, is invoked and the statute of limitations of the creditor’s home state will apply. Major creditors, such as Citibank, American Express, and Discover Bank are almost always based outside of New York. As such, these creditors, and the third-party debt collectors that purchase their delinquent accounts, are subject to the statute of limitations of the home state of the creditor.
The most common state in which creditors incorporate is Delaware, which has a 3-year statute of limitations for debt-collection lawsuits (10 Del. C. § 8106). So, for example, if you had a Discover Bank credit card that you stopped paying on January 1, 2012, and Discover Bank transferred your delinquent account to a third-party debt buyer, such as Portfolio Recovery Associates, LLC, then since Discover Bank is a Delaware Corporation, Portfolio Recovery Associates, LLC, would have until January 1, 2015 to sue you for the debt. Since Discover Bank is a Delaware Corporation, a 3 year statute of limitations would apply to your New York Discover Bank credit card debt, even if your credit card debt is transferred to a local third party debt collector, such as Portfolio Recovery Associates, LLC.
Both creditors and debtors are frequently uninformed as to this rule, and often proceed to litigation under the assumption that New York’s 6-year statute of limitations applies, when, in fact, it might not.
LONGER THAN 6 YEARS
If a debt collector has convinced you to make any payment at any time after you first stopped paying the debt, the plaintiff’s time to sue you starts to run again. For example, if your last payment was made in December 2008, but you agreed in December 2011 to start making partial payments and, in fact, made a payment to the debt collector, the statute of limitations will now be renewed, starting from that 2011 payment, which means the creditor can have up to January 2018 to sue you. There is also something called “tolling,” which means suspending or pausing the statute of limitations. This can occur during any time in which you are not within the state. In other words, if you leave the State of New York for a period of time and then return, the statute of limitation does not run during the time you are out of state. It begins again from where it left off when you return.
FAILURE TO FILE SUIT WITHIN THE STATUTORY TIME PERIOD
If the court finds that the statute of limitations has run and the action is time barred, the case will be dismissed, and the creditor will be prohibited from ever suing you again to collect the debt.
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