Before the Consumer Financial Protection Bureau and consumer protections were strengthened it seems consumers didn't have much of an opportunity to even fight private arbitration "courts" that were bought and paid for by the banks. Although registration of arbitration awards as judgments seems to have ended in North Carolina there are many questions surrounding credit card debt explored herein including debt defense and debt settlement.
Can I be sued for credit card debt in NC?
Yes- Credit cards are legally allowed to sue when the borrower is in default. For some reason many individuals assume all creditors can do is put a negative mark on a borrower’s credit report. The bottom line is this- If banks could not sue for credit card debt they would stop issuing cards. Some of the main law firms that represent banks and debt buyers for credit cards lawsuits in North Carolina are listed below. The law firms below generally represent the plaintiffs listed and do not actually own the debt.
How long before credit cards sue?
If and when credit card companies decide to sue varies based on the creditor. Chances are if you have stopped paying on multiple cards you will eventually be sued. How long varies from a few months to right before the statute of limitations expires. Creditors can monitor your credit report to see if you are paying other debts and they have your application information disclosing whether you own a home and how much you make. They often send warning letters and make calls before filing suit as filing suit costs them money and may result in the borrower filing bankruptcy. Sometimes rather than sue on a delinquents account a bank employs a collection agency to harass a borrower, they may write off the debt and issue a 1099 tax bill, or sell the debt to debt buyers.
Are credit cards unsecured debt?
Credit cards are generally unsecured debts. The rare exception is a store card which is a purchase money security interest debt meaning the store lent you money to purchase their merchandise. This could potentially include large items such as a refrigerator, TV, jewelry, or furniture. Badcock Furniture is notorious for demanding return of their merchandise when a customer refuses to pay. For most retailers it is simply easier to ignore the collateral and sue on the debt since used items rarely retain their value anyway.
Can I ignore credit card debt?
Although many choose to ignore credit card debt that is usually not the best course of action. The ramifications of ignoring credit card debt usually include damage to your credit score which can impact your insurance rates and even your prospects of landing that new job. The best approach is usually to tackle the situation early either via debt settlement or bankruptcy before lawsuits are filed, judgments are docketed, and the Sheriff is knocking on your door looking to take your property.
Do I have to go to Court for credit card debt in NC?
You don’t technically have to attend court just because you have been sued in North Carolina. Usually the creditor would prefer you not Answer the lawsuit or attend Court as that makes their job that much easier. Often if you fail to file a written Answer with the Court there is not even an actual court date. The creditor simply wins via default judgment and they simply mail a judgment to the clerk for signature. After a judgment is obtained you could potentially be required to appear in Court to disclose your assets for collection purposes via supplemental proceedings.
Can you go to jail for credit card debt?
You can’t be jailed simply because you did not pay your VISA bill. Although the media loves to report about the modern day debtors’ prison as an attention grabbing headline they no longer exist in the strict sense. Sure you can go to jail for not paying criminal court fees, child support, alimony, or ignoring a court order to appear before the court. That being said, you can longer be put in jail for not repaying a loan, which was common practice in England during colonial days and even the early days of America. Not even a judgment can result in jail time unless you ignore a directive from the Court such as a supplemental proceeding to disclose assets. About the only way credit card debt could result in incarceration is if there were accompanying criminal charges such as fraud or identity theft.
Can credit cards put a judgment on me in NC?
Yes- credit card debt can result in a judgment due to non-payment. Judgments are how creditors enforce their right to collect. Without the right to sue and obtain a judgment banks would not be in the business of loaning money.
What does it mean to have a judgment against you in NC?
A judgment in NC usually is for a specific dollar amount. Judgments are recorded in the county where the action was initiated, but can also be transcribed to additional counties. A judgment in North Carolina can result in a lien on real property owned by the debtor.
Can they take your house for credit card debt in NC?
A judgment lien on a house can potentially expose someone to losing their house to a creditor. There are however several protections to those living in most states. North Carolina allows married couples to have their house deeded as tenancy by the entirety which means only joint creditors can attach a lien to the house. Another protection is a debtor’s right to exempt up to $35,000 equity in a residence in which he or she resides if they properly claim the exemption after being issued their notice of right to claim exemptions.
Can they take your car for credit card debt in NC?
A creditor with a judgment lien could potentially take a vehicle titled in the name of the debtor. Before any property can be seized by the Sheriff a person they must be issued their notice of right to claim exemptions as mentioned above. This allows the debtor to claim certain property as exempt if properly filed within 20 days of receipt. Failure to file these exemptions at the courthouse waives all exemptions. A debtor could potentially exempt up to $8,500 equity in a vehicle. Keep in mind it is highly advisable to consult an attorney when filing out this paperwork as any mistakes could result in lost property including bank accounts.
Can credit cards garnish my wages in NC?
Although North Carolina generally does not allow for garnishment of wages except for child support or alimony there are sneaky ways for a judgment creditor to get to your money. First they may have an out of state judgment in another state that does allow wage garnishment. Second they may be able to get to you bank account containing your wages if you fail to claim your bank account as exempt after being served the notice of right to claim exemptions as noted above. Many individuals fail to claim their bank account as exempt on the standard AOC form sent by the creditor simply because there is no obvious place to list a bank account.
How long is a judgment valid in NC?
A judgment in North Carolina is valid for ten years and can be extended one time for an additional ten year period by the filing of a new action based on the original judgment. In addition to lasting up to 20 years, judgments in NC continue to accrue at 8% interest per year.
Can I be sued as an authorized user on a credit card?
Authorized users are generally not responsible for the underlying debt. That being said, it may still appear on their credit report so if the card is in default they should try and have their name removed from the account as soon as possible. If you are unsure whether you are an authorized user or codebtor you may want to contact the creditor to verify your responsibility in addition to running a credit report online.
Can I be sued as a codebtor on a credit card?
Codebtors are just as liable as the primary borrower. Each borrower is jointly and severally liable for the entire debt. The creditor can sue both parties or elect to sue just the codebtor for the entire amount if they so choose.
Can I be responsible to pay off the credit card debts of my deceased spouse?
You generally don’t inherit the debt of your spouse in North Carolina unless it is medical debt. There is a duty to support your spouse in North Carolina known as doctrine of necessaries which can include the medical debt of your spouse. The estate is generally responsible for all the debts of a dead person.
What is mandatory credit card arbitration?
For many years the credit card companies would first file for binding mandatory arbitration awards when consumers fell behind on their payments. These arbitration companies were supposed to be neutral, but in fact the fees were paid by the banks creating a potential conflict of interest. The practice of registering these arbitration awards as judgments appears to have ended in North Carolina, but the clauses still remain in many contracts. It is important for consumers to read the fine print to see if they can opt-out of arbitration clauses which usually restrict their rights.
How long before credit card debt is written off as uncollectable in NC?
This answer really depends on the creditor. Just because your credit report may reflect the debt is charged off does not mean the debt has been forgiven or that you will not be sued in the future. In fact, it does not even mean the creditor wrote the debt off their taxes and a 1099-C is imminent. A write off usually means the debt has been sold to a collection agency which may then begin their own collection efforts including filing a lawsuit.
What is the Statute of Limitations for credit card debt in NC?
The statute of limitations for most credit card debt in North Carolina is 3 years from the date of last payment under NCGS 1-52. The rare exception to the usual 3 year statute of limitations is an agreement signed under SEAL which can invoke a 10 year statute of limitations under NCGS 1-47. Signed under SEAL usually just means it simply had the word SEAL next to where you signed.
Be aware that making a new payment after the statute of limitations has run can revive an otherwise expired debt. This is why you should never make even a $20 payment over the phone to a collection agency without written verification of the debt and verifying your own records to make sure the debt is still valid. Also, it is important to note that the statute of limitations is an affirmative defense under NC law that must be properly raised in a written Answer or else the defense is waived.
What if a debt buyer has purchased credit card debt?
If a debt buyer has purchased your debt then they have the legal right to sue on the debt similar to the original creditor. Some debt buyers never file suit because they buy old debt without proper documentation and they just plan to harass the debtor for whatever they can without going to Court.
The good news is if your debt has been purchased by a debt buyer such as Portfolio Recovery Associates or Unifund CCR Partners is they usually pay pennies on the dollar for old debt and often are willing to take a substantial discount on settlement because they still make money. If they purchase debt for 5 cents on the dollar or less and they settle for 10 cents on the dollar that is still a 100% profit margin.
Can a collection agency sue for credit card debt in NC?
Collection agencies or debt buyers can sue for credit card debt if they have all the proper documentation of the debt. The must allow follow special rules outlined in NC statutes applicable to debt buyers. Some of the main requirements are as follows:
How to respond to court summons for credit card debt in NC
Unless you are sued in Small Claims Court there is usually no court date provided in the lawsuit served via Sheriff or certified mail. If sued in District or Superior Court in NC the Defendant must file a written Answer with the Court within 30 days of being served with the lawsuit. Failure to file a written Answer allows the creditor to seek a default judgment for the amount requested without the need for an actual court date or hearing. Seeking the immediate advice of an attorney is critical to properly raise any and all applicable defenses some of which are outlined below.
Credit card debt defenses in NC
Some of the possible affirmative defenses and counterclaims that can be asserted if being sued are as follows:
What is the statute of limitations for credit card debt in NC?
Pursuant to NCGS 1-52 most contract actions in North Carolina including credit card debt are subject to a 3 year statute of limitations. A contract signed under SEAL has a 10 year statute of limitations under NCGS 1-47(2). To be signed under under SEAL generally does not require a notarized signature, but must simply have the word SEAL next to the signature line.
How to win a credit card lawsuit in NC
Winning a credit card lawsuit in North Carolina usually requires a lot of diligence and a little bit of luck. Assuming you actually owe the creditor money then the issue becomes whether the creditor can prove the asserted amount in court. If it is a debt buyer suing then they may not have the required paperwork to establish the debt and the amount owed. If the original creditor is the Plaintiff then perhaps the amount of interest or penalties has been improperly calculated. Finally, if a Defendant requests a jury trial and survives any summary judgment and discovery motions that can lead a creditor to simply give up rather than go through the hassle of a trial.
When is the best time to settle credit card debt?
Creditors sometimes run "special" offers during tax refund season as they know that is a one time a year most people have extra money and they want to get their hands on that money before anybody else does. That being said, the best time to settle is usually when a debt is very delinquent, but before it has resulted in a lawsuit as that adds extra fees payable to the law firm. The delinquent status is usually the first step of many debt consolidation companies- they sit on your first few payments to allow your debts to become more delinquent. Another reason debt consolidation companies don't make any payments early on is they keep much of your initial payments as their fee.
How to settle credit card debt when a lawsuit has been filed
If you don’t dispute the amount owed and you expect to lose in Court then settlement may be your best option outside of bankruptcy. Often creditors will settle for 50 cents on the dollar or less lump sum rather than go through the time to obtain a judgment and the uncertainty of collection efforts. In 2022, after multiple stimulus checks in 2021, extended unemployment benefits, home prices at all time highs, and bankruptcy filings down many law firms are being more aggressive and demanding settlement numbers above 50% of the balance owed.
Another option besides calling a collector or law firm yourself is engaging a bankruptcy lawyer who may be able to provide extra leverage in the negotiation process as bankruptcy usually means the creditor receives zero. That being said, you can always offer either either a lump sum or monthly payments directly to the creditor or their attorney.