(Disclaimer: I am not a lawyer. Do not accept it as legal advice).
I don’t know about you, but I have lived in three states since I got my first credit card. Since moving from California three days after graduating from high school, I have lived in Oregon, Washington, back to Oregon, back to Washington, back to Oregon again, and finally to Idaho.
I imagine that many of you have lived in multiple states during your adult life.
When you miss your first credit card payment (or any other debt), two things happen. First, when it is thirty days late, the credit card issuer reports that it is 30 days late to the credit bureaus to which it belongs.
Second, the clock for the Statute of Limitations begins to tick. The SOL in each state sets the time limit in which legal proceedings can be brought against someone in a criminal or civil case.
If you never pay that credit card, then the issuer or collection agency that takes over the account can sue you for the amount until the end of the statute of limitations. For example, here in Idaho, a credit card account falls under the definition of a written contract, which has a five-year SOL. So if I missed a payment that is due on June 4, 2016, I can be sued until June 4, 2021.
But what if I move back to Oregon? Oregon has a six years SOL for credit cards. Did I cleanse one more year? If you were sued in Oregon during that sixth year, you would say the SOL had expired under the Loan status.
Most states have a loan law on their books. The indebtedness statute allows the court to “borrow” the statute of limitations from the state where the debtor lived at the time the debt was incurred. This is designed to prevent creditors and other plaintiffs from “buying” states to file their claims in the more lenient SOL state.
Going back to my scenario, the lawsuit would be filed in Oregon because it has the longest SOL. I would argue in my defense that the debt was prescribed because there was
- He was living in Idaho when the debt occurred and
- Oregon loan statute requires the Idaho SOL to prevail.
Of course, the final decision would belong to the judge, so this argument is not a guarantee. But if you ever find yourself in this situation, check to see if your state has a Loan Status that can be argued in your favor. You may prevent a judgment from being entered against you.