A statute of limitations is a rule of law that prescribes a certain period of time within which a plaintiff must file his civil lawsuit in court. Each state establishes its own limitation period for various causes of action, e.g., negligence, fraud and breach of contract. North Carolina has established a statute of limitations period for actions by creditors to recover the default balance due on an automobile loan.
Identification
An automobile loan is a legally binding contract in which the creditor loans the borrower a lump sum for the purchase of a vehicle, and the borrower promises to pay back a specified sum each month by a certain date. The loan agreement is a written document (usually a promissory note), and it contains the essential terms and conditions of the contract, including the interest rate as well as the incidents and consequences of default. The appropriate limitations period for an automobile loan would be that period set by North Carolina for breach of contract actions.
North Carolina Limitations Period
Chapter 1 1-52.1 of the North Carolina Code of Civil Procedure has established a three-year limitations period for bringing civil actions based on breach of contract. The statute of limitations clock begins ticking on the date the debtor defaulted on the automobile loan, and it stops on the day the creditor files a civil action in court. A suit by a creditor that is filed outside the designated limitations period is considered time-barred and may be dismissed. A creditor whose complaint is dismissed for failure to comply with the applicable statute of limitations period has no further legal recourse against the debtor.
Considerations
The court does not monitor civil actions filed for compliance with the statute of limitations. A debtor who has defaulted on his automobile loan obligation is responsible for raising the issue of the statute of limitations as a defense to the civil action filed against him by the creditor when the debtor answers the complaint filed by the creditor. Once properly raised, the debtor can request the court to dismiss the action.
Misconceptions
The statute of limitations does not extinguish the debt; it merely prohibits the creditor from enforcing payment through the legal system. Even though a civil action for repayment has been dismissed for being filed outside the relevant statute of limitations period, a creditor in North Carolina may continue with collection activity; though, as a practical matter, such efforts may be futile.
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