What Is The Statute Of Limitations For A Debt Buyer Or Collection Suit In Alabama?


When Alabama consumers are sued, one of the first questions people ask is “What is the statute of limitations” on collection suits brought by debt buyers. Let’s take a moment and examine this question.

First, a suit begins when a lawfirm such as Zarzaur & Schwartz, PC or Holloway & Moxley or Nadler & Associates (or some other collection lawfirm) files suit on behalf of debt buyers such as Asset Acceptance, LVNV, Midland Funding, Portfolio Recovery, Unifund etc.

Normally the suit is brought under one or more of the following: Breach of Contract, Open Account, Money Had and Received or Stated Account (Account Stated).

And the suit will be brought in Small Claims (up to $6,000), District Court ($6,000 to $10,000), or Circuit Court ($6,000 to $10,000 and anything over $10,000).

Second, the statute of limitations (SOL) means the time period in which the plaintiff (here the collector or junk debt buyer) has to sue before it is too late. This is what is known as an “affirmative defense” which means you need to put this in your Answer (or make sure your lawyer puts it) or you can “waive” or lose this defense.

Third, the reason this is such a critical question is because a suit brought after the statute of limitations has expired is due to be dismissed. This means the case will be over. You win.

And often the debt buyer can be sued under the Fair Debt Collection Practices Act (FDCPA) as it violates the FDCPA to file suit after the SOL has expired.

With this said, let’s now look at what the SOL is in Alabama for collection suits.

Normally in Alabama a breach of contract action is a six year statute of limitations. We see some original creditors (Capital One, Citibank, etc) sue under this and it used to be that debt buyers would not because they rarely have the documents to support making such a claim. But now they do make this claim even though they still have problems with the documents. We won’t go into these details as they are beyond the topic of limitations but we can discuss these by phone with you.

You look at when the contract was “breached” to know when the clock starts running on the six years. Normally this will be when you missed a payment. So if payment was due on May 1, 2013, and you did not make that payment, then the statute of limitations starts on May 1, 2013.

In Alabama, normally an open account is a three year statute of limitations and most credit cards fall under this type of agreement. Most collection agencies or debt buyers do not like this as it is a shorter time period and there is law that suggests (or requires, depending on how it is read) that every charge must be proven by the creditor or debt buyer.

Very few debt buyers sue within 3 years.

You calculate the beginning of it the same way as with a breach of contract — look at the missed payment and that is normally the trigger date.

The most common type of suit is an account stated suit for which the statute of limitations is six years. The problem the debt buyers have in this type of theory is that they normally do not meet the requirements. Again, we can discuss this by phone as I don’t want to overload this article with those details. Understand you do have arguments for why this theory is likely not a good theory to sue you on. (The same is true for something called “Money Had and Received”).

The final type of statute of limitations is when you are sued on vehicle — after a repossession or a total loss. When you buy a car at a dealership and the dealership is listed as the “seller” and the one allowing you to make monthly payments, then almost certainly this type of deal is known as a “sale of a good.” (This is much different than you going in with financing from your bank or credit union — that will normally be a six year statute of limitation).

So here’s the normal situation.

You go to Joe’s Chevy and buy a car with $400 a month payments for 60 months.

The contract gets assigned to Citi Auto.

Citi then supposedly sells the loan to Santander.

Santander then supposedly sells the loan to Cascade Capital.

Who then on the exact same day it buys the loan, supposedly sells it to Velocity Investment.

Velocity Investment then sues you because in 2011 the car was picked up and sold and there is a “deficiency” of $6,000. Velocity sued you in 2016.

Too late in my opinion — they should have sued you in 2015. Unless you made a payment in 2012, 2013, 2014, 2015 or 2016, the statute of limitations is great defense.

Now the car debt buyers (Cascade and Velocity, etc) think the statute of limitations is 6 years, not 4 years. I am confident they are wrong on this.

Do keep in mind that if you make a payment while the statute of limitations is running, it may restart the clock. Or even if the time period is over, it may restart it. So you need to check your records and see if you made any payments. And be prepared for the debt buyer to lie and claim you made a “cash” payment at just the right time so that the lawsuit is not outside the statute of limitations.

I mention this to you to simply warn you about this so it won’t come as a surprise. We can deal with this at trial if it comes up but we want you to be prepared for this.

Bottom line — what do you do with this information?
I want you to understand the gist of the statute of limitations defense so you can make good decisions. Now if a debt buyer has sued you, there are even better arguments than statute of limitations but you want to know about all of your options.

We have a comprehensive video (and transcript if you prefer to read) of your five options when sued by a debt buyer in Alabama.

Be glad to help you understand your options and what is best for you. Call us at 205-879-2447 or click the button below.

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John Watts

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