If you’ve fallen behind on a private student loan, the possibility of being sued can be terrifying. Every knock at the door causes anxiety, causing you to wonder whether you’re being dragged into court.

It’s natural to fear a private student loan lawsuit. The court system can be confusing, with exacting procedural rules and severe penalties for stepping over the line. Losing a lawsuit involves the prospect of wage garnishments, bank account levies, and additional costs that can wreck you financially.

The system is designed to scare you – and it succeeds. In spite of that fact, there’s good news to be had.

Private student loans have a limited time to sue you.

When it comes to federal student loans, you can be subjected to legal proceedings until the loan is satisfied – or until you die. Not only can the government file a lawsuit against you, but also to take administrative steps to force you to pay without using the court system.

Private student loans, however, aren’t covered by federal student loan laws. The only way you can be forced to pay a defaulted private student loan is through the lender’s use of the court system. The lender can’t use administrative wage garnishment, tax refund offset, or Social Security offset to force you to pay the debt.

More important is that the lender is subject to a strict time limit called a statute of limitations – during which they can use the court system to force you to pay. If the student loan company doesn’t file a lawsuit within the time specified by law, they can never force you to pay the debt.

Understanding the statute of limitations may make the difference between payment and getting off free and clear.

Here’s the rule on the statute of limitations for people who live in California.

What is California’s statute of limitations?

For written contracts such as private student loans, California law sets a statute of limitations of four (4) years from the date the claim accrues.

The claim accrues when the contract for payment is breached – in other words, once the first payment is not made under the contract.

If the promissory note is a negotiable instrument, however, the law sets the statute of limitations at six years of each individual payment due date. Once the loan is in default and the entire balance is accelerated, a new six-year statute of limitations takes over.

This means each monthly payment represents a new beginning to the six-year clock. If you’ve got a 30 year Note, theoretically the lender may be able to sue you for 36 years (for at least the last payment due, that is).

The saving grace, however, is in the acceleration portion of the law. If the private student loan lender calls the entire debt due, they get six years from that date as the applicable statute of limitations.

Does the California statute of limitations apply?

California courts consider the statute of limitations to be a procedural matter, so California law will typically apply.

An exception is when the promissory note applies a different state’s statute of limitations; in that case, the court will apply the other state’s law if it is shorter.

In this way, the courts recognize the need to protect their state’s citizens from overreaching lenders.

Beware actions that may pause the statute of limitations

You may think you’re home free when it comes to a lawsuit only to find that the statute of limitations hasn’t expired. In fact, specific actions may pause the clock and extend the time for a private student loan holder to sue you; this is known as “tolling” the statute of limitations.

Under California law, the statute of limitations may toll under certain conditions:

  • when you are out of state;
  • when you are in bankruptcy and the automatic stay is in effect;
  • during periods of incompetence due to mental or physical reasons;
  • if you die with less than six months left on the statute of limitations, it will be extended for six months after your death;
  • if you die with more than six months left on the statute of limitations, it will be extended for one year after your death;
  • if you are in jail, it is extended for two years or until you’re released, whichever comes first;
  • if you are in the military, the statute of limitations pauses until you are no longer serving – even if you are serving during peacetime or as a career.

Resetting or reviving the statute of limitations

Debt collectors will call or send notices about old private student loans, some of which are close to or beyond the statute of limitations. It’s easy to get tripped up and make the mistake of extending, or even reviving, the statute of limitations.

Specific actions may reset or revive the statute of limitations, giving the private student loan holder additional time to file a lawsuit. This is one of those situations when you need to be very careful about the words and actions you take when dealing with collectors.

A statute of limitations may be extended or revived when you:

  • acknowledge the debt in writing; or
  • make a payment; or
  • agree in writing to a new repayment schedule.

To prevent one of these “zombie debt” situations, make sure to double-check your records and your credit report before talking to a collector about an old private student loan.

What if a collector sues after the statute of limitations expires?

Collectors will usually disappear once the statute of limitations expires. Though you may get a collection letter, it should have a clear statement that the creditor is barred from suing you in court due to expiration of the statute of limitations.

From time to time, however, a creditor files a lawsuit on a time-barred private student loan. Maybe this is due to poor record-keeping, accounting errors, or just sneakiness; regardless, ignoring the problem will still lead to a default judgment.

California law prohibits creditors from starting a lawsuit, arbitration, or other legal proceeding to collect a debt after expiration of the statute of limitations. Though the law prohibits filing suit on an expired debt, you should respond to the lawsuit or the judge won’t realize the issue exists.

Once the lawsuit has been dismissed, you may be able to sue the collector under state and federal collection laws.

Private student loans don’t live forever, but you need to remain vigilant.

The statute of limitations on private student loans protects you against a lifetime of collection. But the many exceptions and loopholes can make it challenging to figure out when the debt becomes unenforceable.

That’s why it’s essential to monitor your accounts, double-check your dates, and maintain records about your loan.

Be careful about what you say and do when a collector contacts you about a defaulted account.

Never ignore court documents, or you may surrender your legal rights.

If in doubt, talk with a lawyer.

Where Can I Find the Law?

Lawyers, accountants and financial professionals appreciate being able to find the laws that apply to this subject. Even if you’re not a legal or financial professional, you may be the sort of person who likes to wade through this sort of information. Either way – enjoy!

Statute of Limitations

Tolling the Statute of Limitations

Extending or Reviving the Statute of Limitations

Prohibition on Filing Time-Barred Cases

Student Loan Lawyer Jay Fleischman

I’m Jay Fleischman – I wrote this for you.

I’ve been a lawyer protecting people against lenders and collectors for over 24 years. When it comes to student loan law, no attorney has more experience than I do – period.

I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.

I played a central role in developing the Student Loan Law Workshop, where I personally helped teach over 350 lawyers how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.

I’m licensed to practice law in New York and California and advise borrowers nationwide. And in case you were wondering – every single word on this page was written by me, and I personally stand behind it.

I’m Jay Fleischman – I wrote this for you.

Student Loan Lawyer Jay Fleischman

I’ve been a lawyer protecting people against lenders and collectors for over 24 years. When it comes to student loan law, no attorney has more experience than I do – period.

I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.

I played a central role in developing the Student Loan Law Workshop, where I personally helped teach over 350 lawyers how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.

I’m licensed to practice law in New York and California and advise borrowers nationwide. And in case you were wondering – every single word on this page was written by me, and I personally stand behind it.