Failing to pay debt may result in negative consequences. A creditor may respond to your past due debt by sending you collection letters and calling you to convince you to pay your debt. If your account becomes more than 30 days past due, the creditor may also report the delinquency to credit bureaus, which can reduce your creditworthiness. A creditor may also sue you for the debt in a North Carolina court. However, in most cases, a creditor cannot garnish your wages in North Carolina.
Domestic Judgments
The North Carolina Wage and Hour Act prevents a private creditor with a valid domestic judgment from ordering your employer to withhold any portion of your wages for repayment of a judgment debt. A domestic judgment is a judgment that was granted by a county or district court in North Carolina.
Exceptions
Although the North Carolina Wage and Hour Act prohibits private creditors from executing a garnishment for debt under a civil judgment, it does not prohibit garnishment for certain other types of debts. If you default on student loan debt or taxes, the creditor to which you owe the defaulted balance may send a letter to your employer demanding the withholding of a portion of your wages for repayment of the debt. North Carolina also permits garnishment for debts arising from unpaid ambulance service charges, alimony and child support.
Foreign Judgments
A foreign judgment is a legal decree obtained by a creditor in a state other than North Carolina. The North Carolina Wage and Hour Act does not prohibit wage garnishment used to collect payment under a foreign judgment. For example, if a creditor sues you for credit card debt in Ohio, and you move to North Carolina after the Ohio court issues judgment, the creditor may take up to 25 percent of your post-tax wages. Allowing wage garnishment for foreign judgments prevents debtors from escaping legal debt obligations by moving to North Carolina.
Preventing Domestic Judgment
Staying in contact with your creditor and making a good faith attempt to repay your debt may help prevent your creditor from seeking a domestic judgment in North Carolina. If you cannot repay your debt, bankruptcy can also prevent a domestic judgment. Although most judgment creditors cannot use wage garnishment as a collection strategy in North Carolina, it is still important to avoid a money judgment. A domestic judgment can severely impact your credit score. Also, judgment creditors may also use other methods to collect a judgment, such as bank account garnishment, real estate liens and liquidation of personal property.
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