North Carolina Debt Relief: Your Guide to State Laws and Managing Debt

Residents of North Carolina are generally near the middle of the pack when it comes to debt per capita, averaging very close to the U.S. per capita balance levels across mortgage, student loan and credit card debts. If you live in the Tar Heel State, you may find yourself with a slightly higher level of auto loan debt than the average national per capita balance, though, as the table below shows.

Besides, having an average American debt load is not necessarily a positive thing. Americans in general carry too much debt. Furthermore, if you fall behind on burdensome debt, it will be sent to collections. This is highly likely to leave a lasting negative impact on your credit report.

This guide looks at how much debt North Carolinians owe, along with ways they can dig themselves out of debt with personal discipline, professional assistance and some consolidation options. We’ll discuss:

• Debt in North Carolina: At a glance
• Debt collection in North Carolina
• North Carolina debt relief programs
• Payday lending laws in North Carolina
• Tips to tackle debt in North Carolina
• Filing for bankruptcy in North Carolina
• The bottom line

Debt in North Carolina: At a glance

Debt collection in North Carolina

Federally, consumers have some protections from debt collectors. The Fair Debt Collections Practices Act (FDCPA) dictates that debt collectors are allowed to call you, but only between 8 a.m. through 9 p.m. They can’t visit you in person at your home or at work, and you can request that the debt collector stop calling by sending them a written request to do so.

The FDCPA does allow debt collectors to contact people in your community who may know you, whether that be your neighbors, employer or family members. However, they are not allowed to tell anyone why they are trying to contact you or the amount of money that you owe. Debt collectors are also not allowed to publish your name and debt load in any type of publicly accessible forum.

Under the FDCPA, “debt collectors” are only those who have purchased a debt from the original creditor. However, North Carolina law classifies even original creditors as debt collectors, extending many of these same protections to a larger group of debtors.

If you feel that a debt collector is threatening you, attempting to coerce you, harassing you or lying to you, report them to the North Carolina’s Attorney General’s office and/or the Federal Trade Commission.

Responding to collection letters

If you receive a collection letter in the mail, don’t ignore it. If it’s a valid debt that isn’t past the statute of limitations discussed below, ignoring it could land you in even more fiscal and legal trouble. Ideally, you’ll sit down with a lawyer to discuss the legality of the debt and next steps. You can find someone to help you through the North Carolina Bar Association or one of its recommended representatives who works with low-income individuals at reduced costs.

Once you receive the letter, you have 30 days to send in a written request for verification. This requires the debt collector to provide you with information such as the current balance along with the name and address of the original creditor. This will allow you to ensure the debt is valid and that it’s actually yours before you take any action to pay it. If you need any help responding, the Consumer Financial Protection Bureau (CFPB) currently provides sample letters on which you can base your reply across five different scenarios.

If you receive a court summons, you are required to provide some type of reply within 30 days. While you will want to employ a lawyer, there are some basics you should know regardless of your legal representation:

• In the unlikely event that you have cause to file a counterclaim against your creditor, they must respond to you within 30 days of your counterclaim being served to them. If they are compelled to do so by the court, they have 30 days from notification from the court.
• After this, the case can be moved into a judgement on the “pleadings,” or the arguments both you and the debt collector made in your written correspondence.
• At this point you should receive a court date. Depending on your county, you may be able to access the time and date of your hearing online.
• Do not miss your hearing. If you do, you’re missing your right to defend yourself. If you cannot attend on the assigned date and time, you can file for a continuance so the hearing will be pushed back to a later date.
• When you go to court, your lawyer will defend you, perhaps citing the statute of limitations or unfair debt collection practices as a defense or counterclaim.

Understanding North Carolina’s statute of limitations

When responding to collection letters, you do not want to do anything to affirm you are responsible for the debt or establish any type of payment plan without first confirming the debt is within the statute of limitations. This is the time during which a debt collector is able to sue the debtor to recoup the debt.

If you admit to being legally responsible for the debt — whether in writing or over the phone — or make even a marginal payment, you restart the statute of limitations. Perhaps the debt had legally expired, meaning it had become time-barred, before the debt collector contacted ƒyou. But because the collector got you to use language that could be construed as an admission of owing the debt, or you made even a marginal payment toward it, you are now legally responsible for it again.

There is no one standard statute of limitations for all types debt in North Carolina. Instead, you can be sued over a delinquent debt during shorter or longer periods of time, depending on why and how you borrowed the money.

In North Carolina, there is no statute of limitations on state tax debt. You can be audited and the bill can be collected at any point. However, your county taxes have a statute of limitations of 10 years.

The countdown for the statute of limitations starts ticking the last time you engage with the debt. Let’s say you have some medical debt that was supposed to be covered by insurance but wasn’t billed properly. You decline to pay, assuming they will run the claim through again with a different code. Four years later, you get a letter in the mail from a lawyer, notifying you that you’re being sued for the unpaid charge.

At this point, you haven’t engaged with the debt or acknowledged that you are responsible for it since the initial billing four years ago. The debt is outside the three-year statute of limitations for medical debt in North Carolina. That doesn’t mean you should ignore a court summons, though. Find a lawyer so you can adequately present your case to the judge.

The best lawyers to contact in these situations are those with consumer advocacy experience. If you can’t afford a lawyer, search for legal aid via the Legal Services Corporation for possible help in North Carolina.

North Carolina debt relief programs

If your debt has become too much of a burden, you may find yourself looking into North Carolina debt relief programs. Be wary of any debt settlement companies that make promises that seem too good to be true, or any debt consolidation plans through which you could conceivably lose your house in the event of nonpayment.

An easy way to find a reputable option is by working with a credit counselor from North Carolina’s district-approved lists. The list includes organizations such as:

• Financial Pathways of the Piedmont in Winston-Salem
• Butterfly Financial Education in Clayton
• Consumer Education Services, Inc. in Raleigh
• Alliance Credit Counseling in Charlotte

A credit counselor can help you access your free, annual credit report, which you can also do on your own at www.annualcreditreport.com. They will then take a holistic look at your financial situation, including debt, and may be able to help you establish a debt management plan. From there, you would make one monthly payment to your credit counselor per month, which they will apply toward your various outstanding bills.

You may be able to find some community organizations to help you manage your debt, as well. Nonprofits will sometimes help those with lower incomes pay their bills so they can get a little relief as they attempt to get their money — including debts — under control. For example, Greensboro Urban Ministry provides immediate financial assistance to community members who are struggling to pay their utilities bills and other housing costs. If you’re not in Greensboro, a great place to start your search is with religious or community organizations of which you’re already a member.

Payday lending laws in North Carolina

Payday lending is prohibited in North Carolina. This is a good thing for you as a consumer, as these small loans are risky if you become dependent on them to make ends meet. They are typically advertised with what appear to be reasonable interest rates, but when you figure the annual percentage rate (APR), you start to see just how outrageous they are. According to the Consumer Financial Protection Bureau (CFPB), you could wind up with an APR as high as 400% with a typical two-week payday loan.

You will not have to worry about these predatory loans in North Carolina, though.

Tips to tackle debt in North Carolina

If you’re in debt, don’t panic. There are ways to dig your way out. You could consolidate your debt, refinance or use a balance transfer card. Let’s learn more about each option.

Consolidate your debt

Debt consolidation loans are most often used with credit card debt, but you could also use one for medical or other troublesome debt. Typically, these loans are unsecured personal loans, meaning you don’t have to put up any collateral for them. Interest rates tend to be lower than those offered by credit card companies, though just how much lower will depend on your credit history.

If you want to consolidate your debt, you should ideally do it before your debt destroys your credit score. Otherwise, you risk being denied by lenders or offered sky-high rates.

Refinance

If your overall debt obligations are making it difficult to stay on top of your car note or mortgage each month, you may want to refinance. This involves replacing your current loan with a new one that hopefully comes with a lower, fixed rate and lower monthly payments.

While refinancing can get your monthly payments down to a more manageable amount, it is extremely likely that you will pay more in interest over the life of your loan. Saving money on interest doesn’t do you a whole lot of good when you can’t afford the monthly payments, so refinancing your mortgage, or auto loan can be a good option for those who are struggling to keep up — even if it means paying more over the long haul.

Use a balance transfer card

If your credit is still acceptable, you may qualify for a low- or zero-interest balance transfer offer on a credit card. These offers allow you to transfer balances from existing credit cards to a new credit card, on which you’ll pay either no interest or low interest for a set amount of time, typically 12 to 21 months. This is a huge boon to getting your debt under control, as high credit card interest rates can make it incredibly difficult to catch up, especially if you’re only making minimum payments. However, you typically need good credit to qualify for these introductory offers.

Additionally, there is typically a 3% to 5% balance transfer fee associated with these cards. This fee is an additional cost, but in almost all cases it’s going to be cheaper to pay it than to let your balance remain where it is, racking up high interest charges. However, if it’s unlikely you’ll be able to pay off the balance before the promotional period ends, this isn’t a good option, as you could end up in the same predicament you were in before, possibly with even more debt to boot.

Filing for bankruptcy in North Carolina

If things are bad enough, you may be considering bankruptcy. Believe it or not, bankruptcy is not the end of the world. According to a study by LendingTree, many find that within a few years, their credit score is back up to a number where they could conceivably borrow again. After that, a bankruptcy falls off your credit report completely after seven to 10 years.

That doesn’t mean it’s a cakewalk, though. You should carefully consider the effects of bankruptcy and whether there’s any other possible path to get out of debt without it. If not, which type of bankruptcy makes the most sense to pursue? There are two main types for individuals: Chapter 7 and Chapter 13.

Chapter 7 bankruptcy forces you to liquidate your assets in order to pay your creditors before any debt is written off. With Chapter 13 bankruptcy, you have the option to restructure your debt into a three- to five-year payment period so you don’t necessarily have to liquidate.

To familiarize yourself with the local laws and regulations surrounding bankruptcy in North Carolina, visit the bankruptcy court for either the eastern or western part of the state.

In North Carolina, if your debt is so overwhelming that you file for bankruptcy, you won’t necessarily lose everything. Laws in the state allow you to retain the following, even while you’re attempting to discharge that debt burden:

• Up to $35,000 of equity in your or a dependent’s primary residence or burial plot.
• Up to $60,000 of equity for a primary residence or burial plot if you are age 65 or older. You must either own the property entirely in your own name or have owned and, in the case of real estate, lived in the property with someone who has passed away.
• Up to $5,000 of equity in any property, provided you have not already met or exceeded the limits above.
• Up to $3,500 of equity in your vehicle.
• Up to $5,000 worth of personal belongings such as clothing, housewares and animals, plus up to $1,000 worth of personal belongings for up to four dependents.
• Up to $2,000 worth of professional books and other tools for your or your dependent’s trade.
• Up to $25,000 within a 529 college savings plan established for your child, plus any contributions you have made in the past 12 months.
• Any money you have stashed in a tax-advantaged retirement account.
• Any money you receive or will receive as a retirement benefit from another state — as long as that state would protect these assets under its own state laws.
• Any money you receive via alimony, child support or separate maintenance.
• Any compensation you’re receiving for personal injury, as long as the debt isn’t directly tied to the incident for which you are being compensated.
• Professionally prescribed health aids, such as a walker or hearing aids.
• The value of your life insurance policy, unless you have cash value in a whole life policy. The policy must name your dependents as beneficiaries. If your life insurance policy is part of your trust and your trust allows creditors to debit against your life insurance policy, it is not exempt from bankruptcy proceedings.

The bottom line

Whether you’re staring down bankruptcy or simply struggling with credit card debt, one thing is certain: The longer you ignore your problem, the worse it will get. Confront your debt but don’t let it send you into despair. There are ways to pull yourself out of the red, as we’ve discussed. Pursue them.

The information in this article is accurate as of the date of publishing.