How Bankruptcy Impacts New York’s Statute of Limitations

As noted in my previous article, “Statute of Limitations,” New York’s six (6) year Statute of Limitations is tolled for the time the bankruptcy is pending, (CPLR section 204) and renewed for an additional six (6) year period if the debtor acknowledges the debt in writing. (GOL 17-101) 

When a debtor files a petition in Bankruptcy, however, the lender may benefit from both of these statutes. Last April, the Appellate Division, Second Department, held that where the debtor’s Chapter 13 bankruptcy petition acknowledged the mortgage debt and promised to repay it, the Statute of Limitations period would be renewed for an additional six (6) years since the petition itself constituted a written acknowledgement of the debt accompanied by a plan to repay it.[1]

It is important to note, however, that not every bankruptcy petition will contain an acknowledgement of the mortgage debt and a promise to repay it. While Chapter 13 Bankruptcy Plans typically include the requisite acknowledgement of the mortgage debt and promise to repay, Bankruptcy petitions filed under Chapter 7 and other chapters may not, and while they will toll the statute for the time during which the foreclosure was stayed, without the requisite acknowledgement of the mortgage debt and promise to repay, they will not cause the renewal of the six (6) year Statute of Limitations.

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[1] (See PSP-NC, LLC. v. Raudkivi, 2016 NY Slip Op 02632 (U), citing National Loan Invs., L.P. v Piscitello, 21 AD3d 537, 538; Albin v Dallacqua, 254 AD2d 444, 445; Lew Morris Demolition Co. v Board of Educ. of City of N.Y., 40 NY2d 516, 520-521). 

Peter Roach

Peter T. Roach & Associates, P.C.