A promissory note is a contractual obligation to repay a debt. Assuming the note is valid and that no other issues relate to it, the creditor must seek enforcement of the note within a certain amount of time. The time period is known as the statute of limitations. In Texas, the Civil Practice and Remedies Code states the limitation period for various claims, including actions to recover a debt.
Purpose of the Statute of Limitations
The purpose of the statute of limitations is to avoid any injustice or hardship associated with one party waiting too long to bring a valid claim to court. The statute of limitation does not prevent one party from suing another; it can, however, be used as a defense. The creditor on a promissory note cannot harass the debtor and threaten suit but then never start a lawsuit; after a certain period of time, the claim on the note becomes stale and the debtor can ask the case to be dismissed if the creditor sues after the limitation period runs out.
Promissory Note Statute of Limitation
Title 2, Subtitle B, Chapter 16, Subchapter A of the Texas Civil Practice and Remedies Code sets forth the relevant statute of limitations for claims in that state. The code does not address promissory notes specifically, but it does address actions for debt. A creditor must file a lawsuit within four years after the debt "accrues." The accrual date depends on the terms of the note. If, for example, the debtor agreed to pay back the sum on the note before January 1, 2010, but failed to do so, the creditor must file suit before January 1, 2014, unless an exception applies.
Tolling the Statute
Certain actions may cause the statute of limitation to "toll," or stop, for a period of time. Section 16.001 of the Texas Civil Practice and Remedies Code addresses the effect disability has on the statute of limitation. Under that code section, the limitation period does not include the time of the disability --- a disability such as being of "unsound mind" (or not being able to make conscious or rational decisions). Using the previous example, if the debtor was of unsound mind from December 2009 until June 2010, the statute of limitation would not begin until June 2010.
Shortening the Limitation Period and Other Issues
Since a promissory note is contractual in nature, the parties may agree to a shorter limitation period. According to the website ExpertLaw, Texas law allows parties to shorten the limitation period for a contract, but it cannot be shorter than two years. Misinterpreting the statute of limitation and other issues regarding promissory notes may affect the legal rights of the parties involved. Readers must seek legal assistance from an attorney in their area before proceeding. This article provides information only; it does not offer legal advice.
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