Statute of Limitations and Foreclosure

Every state has a statute of limitations for filing a foreclosure action. A statute of limitations is a state law that tells the lender that a foreclosure must be filed within a certain time after default on a promissory note. If the foreclosure is not filed by that date, it is not valid and may be stopped or dismissed by a court. A statute of limitations is an “affirmative defense” and must be raised by the homeowner in defense of a foreclosure action. If it is not raised, it is generally considered “waived” and will not be considered in future lawsuits.

The time limit depends on the type of action and the claim that is involved. There are different statutes of limitations for oral contracts, written contracts, personal injury, and fraud. Generally, the statute of limitations for home foreclosures applies to written contracts (i.e. promissory notes). Some states (e.g., New Jersey), have a specific statute of limitations for foreclosure.

Each state has its own statute of limitations, which ranges from three years to 15 years. Most states fall within the three to six year range. The statute of limitations clock for a mortgage foreclosure usually starts when the default occurred, which is generally dated from the last payment.

A foreclosure must be initiated before the expiration of the statute of limitations period. For example, if the expiration of the statute of limitations is March 30, 2015, and the foreclosure is started on March 15, 2015, then the statute of limitations does not apply, even if the foreclosure is not completed before March 30, 2015. However, if the foreclosure action is dismissed or stopped by the lender after March 30, 2015, the time will have expired and the statute of limitations defense is effective against a future foreclosure.

If you have a home that is under threat of foreclosure, consult with an experienced bankruptcy attorney and consider your options. In some cases, a statute of limitations defense may save your home from foreclosure.