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Does Bankruptcy Pause the Statute of Limitations?

We received a great listener question from the Crushing Debt Podcast: “My husband and I have joint credit card debt.  I filed for Chapter 7 bankruptcy eight years ago and got a discharge.  My husband did not file with me, just me alone. My husband recently received a collection notice from from one of the joint creditors that was discharged in my bankruptcy case.  Did my bankruptcy toll the statute of limitations?”

The simple answer is “no” the bankruptcy does not toll the statute of limitations.  However, because this is a blog, I’ll explain the answer in a bit more detail …

A statute of limitations is a time period within which someone must file a lawsuit.  If the lawsuit is filed after the statute of limitations, then the defendant can have the lawsuit dismissed because the plaintiff waited too long to file.  The statute of limitations (“SOL”) in Florida can be found in Chapter 95 of the Florida Statutes.  The SOL to sue on a contract is five years.  Generally, if someone breaches a contract and more than 5 years go by without any lawsuit being filed, the plaintiff is barred or prevented from suing for the breach of contract.

When the SOL is “tolled” that means there is a pause in the SOL clock.  To continue the example above, if the 5-year SOL is tolled for one year, then the SOL actually expires in year 6.  Florida Statutes have a specific statute (95.051) that describes when the limitations period is tolled, and “bankruptcy” appears no where in that statute section.  Therefore, under FL law, a bankruptcy does not toll or pause a statute of limitations.

However, because this is a bankruptcy question, we also have to review section 108 of the Bankruptcy Code can be summarized or simplified as follows:

If applicable nonbankruptcy law fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor, and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of: (1) the end of such period; or (2) 30 days after notice of the termination or expiration of the stay. 

Accordingly, if the SOL expires under state law after the bankruptcy is discharged, even by one day, there is no extension or tolling of the SOL time period.  If the SOL expires while the bankruptcy is pending, the plaintiff has 30 days after the bankruptcy is completed to file its lawsuit, otherwise the lawsuit is beyond the SOL.

In the listener’s question, the bankruptcy being filed 8 years ago is irrelevant because we have to figure out when the SOL started against the husband who didn’t file bankruptcy.  If the debt is a revolving debt (like a credit card) the husband’s SOL may not have started when his wife filed bankruptcy, but could have started recently if, for example, the husband’s last payment on that debt was a year ago.  If the default on that loan was actually 8 years ago, then the husband may have a claim against the creditor for improper debt collection activities (search this Blog and The Crushing Debt Podcast for “FDCPA,” “FCCPA,” “Zombie Debt,” or “Creditor Harassment.”)

Finally, the fact pattern above was regarding a Chapter 7 case.  It should be noted that in a Chapter 13 (reorganization or payment plan bankruptcy) there is a co-debtor stay.  Thus, even if one spouse files alone, the other spouse who owes the debt jointly with the debtor does get the benefit of the automatic stay while the Chapter 13 is pending.  In a Chapter 7 case, there is no co-debtor stay.  As many Chapter 13 cases are three (3) to five (5) years long, it is possible that the SOL will expire while the Chapter 13 is pending.  Therefore, both the non-filing spouse and the creditor need to be aware of the various timelines and deadlines – the creditor so it doesn’t inadvertently miss the expiration of the applicable SOL, and the debtor to know when the applicable SOL actually expires.

If you have questions bankruptcy, debt collection, or statutes of limitation, please contact us to schedule a free initial consultation to discuss your options at 727-261-0224 or email me directly at shawn@yesnerlaw.com. Please also subscribe to the Crushing Debt Podcast, on Apple Podcasts, Spotify, and other podcast players, including Amazon Echo (“Alexa”) for more free information about these topics.

Shawn M. Yesner, Esq., is the host of the Crushing Debt Podcast and founder of Yesner Law, P.L., a Clearwater-based boutique real estate and consumer law firm that helps clients eliminate the financial bullies in their lives. We assist clients with asset protection, the sale and purchase of real property, Chapter 7 liquidation, Chapter 13 reorganization, bankruptcy, foreclosure defense, debt settlement, landlord/tenant issues, short sales, and loan modifications in Clearwater, Tampa, Westchase, Odessa, Oldsmar, Palm Harbor, Pinellas Park, Largo, St. Petersburg, and throughout the greater Tampa Bay area.

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