The timeline in which a creditor can file suit over unpaid debts is not infinite. The statute of limitations outlines the period for which a debt is eligible to be filed suit for. The interval that must pass before an account is time-barred is ultimately dependent on the type of account and where it was opened.
Types of Debts
When lent by a creditor, unpaid funds will fall into one of two categories: open end or closed end. As a rule of thumb, accounts which can be utilized multiple times (such as a credit card) are considered open-end. If money is lent for a one-time purchase (mortgage on a home) for which the payments are fixed, the account falls into the closed-end category. However, not all loans are quite as clear cut. Sometimes, a loan will fall into a gray area. For instance, if a loan is disbursed in fixed amounts but on more than one occasion. A Miami civil trial attorney can help debtors and creditors alike in determining exactly what kind of debt they are dealing with.
After determining which category the debt falls under, the borrower will have to consider what kind of agreement was made for the repayment of the debt. This will factor into how long the creditor has to initiate legal actions in order to be repaid. The statute of limitations placed on different types of debts varies from state to state. Here is an overview of the time frame used by the state of Florida:
- Closed-end with written contract: 5 years
- Closed-end with oral contract: 4 years
- Closed-end with promissory note: 5 years
- Open-end: 4 years
The time limit starts on the day the agreement is made for closed-end accounts, and at the time first payment is due for open-end accounts. Nevertheless, it is important to keep in mind the fact that time is not kept when payments are voluntarily made or when the debtor is not in the state. Therefore, if a borrower defaults on his mortgage and moves to a different state, the statute of limitations does not apply. Also important to note, an oral agreement can restart the clock.
The complex nature of debt collection suits calls for a highly experienced Miami civil trial attorney. If you have questions about this area of law, please reach out to our team for a free consultation.