Statutes of Limitation and Bankruptcy

One of the reasons that people file for bankruptcy is because of attempts by creditors to collect on their debt. One way that these creditors can attempt to collect on that debt is by eventually filing a lawsuit in state court to secure a judgment for the debt amount, if the debt collection proceeds to that point.

When the bankruptcy is filed, an automatic stay is put into effect, stopping any attempts to collect on that debt. Since creditors have a certain period of time to initiate actions to collect on a debt, many people wonder what effect the filing of the bankruptcy has on this particular statute of limitations.

Under 11 USC 108(c) of the Bankruptcy Code, these statutes of limitations are tolled, meaning that they are essentially paused, until the later of the end of that statutory period, or 30 days after the expiration of the bankruptcy case. What this means is that the automatic stay of the bankruptcy tolls the statute of limitations until at least 30 days after the expiration of the bankruptcy case.

Of course, many times the right of the creditor to collect has been discharged in the bankruptcy. But in the event that the bankruptcy does not succeed, or for some other reason, the statutory period to collect is extended by the filing of the bankruptcy.