The Statute of Limitations on Money Lent

by Roger Thorne J.D.; Updated September 26, 2017

Whenever you lend money to someone, you have a limited amount of time, from a few years to as many as 15, in which you can sue that person if she doesn't pay back the loan. The amount of time you have varies depending on the nature of the agreement into which you entered and the laws of your state. The laws that limit this time period are known as statutes of limitations.

Lending Money

You have the right to lend money to friends, family members or anyone else. When you lend money, you can require the borrower to pay you back with certain conditions, such as by making periodic payments or paying back the money within a certain time frame. If the person fails to pay the money back, you can't simply go take it. However, you can sue the person and, if you win, take the money through various methods such as bank levies, property seizures or wage garnishments.

Agreement Types

There are four basic kinds of agreements when it comes to lending money: oral contract, written contracts, promissory notes and open accounts. An oral contract is an agreement in which the parties do not write the terms down, while a written contract does have an accompanying document. A promissory note is a document in which one person makes an unconditional promise to repay the money, while an open account is an ongoing loan like a credit card. Depending on your state, some agreements have different time limits than others.

Time Limits

How much time you have to sue someone who failed to pay back a loan differs broadly. For example, if you give someone a loan in California through an oral agreement, you have a two-year statute of limitations, but if you made the agreement in writing, you have four years. On the other hand, if you entered into an oral agreement in Ohio, you have a six year limit, but if you made the agreement in writing, you have 15.

Causes of Action

A cause of action is the factual basis for a lawsuit. When you lend money to someone, you gain a cause of action when that person fails to pay you back, known as default. If, for example, you lend someone money and he agrees to make monthly payments, he defaults on the loan as soon as he misses a payment. Once default occurs, the statute of limitations clock begins running, and you have a limited amount of time after that in which to sue on the debt. You can file a lawsuit whenever you wish, but you have to be able to provide evidence to prove your claim and win your case. Written evidence is always best, but oral evidence can be sufficient. Talk to a lawyer if you need legal advice.

About the Author

Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.