When consumers do not pay back their debts, creditors may sue them in a civil lawsuit. In some states, after winning the lawsuit, the creditor may ask the court to garnish the debtor's wages, or hold back part of the debtor's pay each pay period to pay off the debt. In North Carolina, it is usually illegal to garnish debtors' wages.
Consumer Debt Prohibition
As of 2011, it is illegal in North Carolina to garnish a debtor's wages for any debts that were incurred while the debtor lived in North Carolina. This prohibition applies to both secured and unsecured debts. Whether you owe money to a credit card company or to your mortgage broker, if you accepted the loan in North Carolina, the creditor cannot garnish your wages for repayment, even if he wins a civil lawsuit against you.
Exceptions
If you owe money to the IRS or to the North Carolina Department of Revenue for unpaid taxes, your wages may be garnished in North Carolina. North Carolina law also allows a debtor's wages to be garnished if she owes back child support or student loans. In addition, the courts will enforce garnishment orders made in other states. Thus, if you work for a national company, your creditor can sue for garnishment in a different state where your employer's business is also located, then ask North Carolina to enforce the garnishment against you.
Fair Debt Collection
It is illegal for debt collectors to threaten debtors with wage garnishment or other legal consequences, unless the creditor intends to carry out the threat. Since most wage garnishment is illegal in North Carolina, debt collectors may not threaten to garnish the debtor's wages if the debtor does not make payment arrangements. Making empty threats is considered coercion; debt collectors who engage in this practice may face fines of up to $1,000 per violation.
Avoiding Garnishment
The best way to avoid civil lawsuits is to contact your creditor if you are having trouble paying back your loan, especially if your debt falls under one of the categories that is exempt from the prohibition on garnishment in North Carolina. Creditors are often willing to make alternate payment arrangements, rather than going to the expense of attempting to collect the debt from a debtor who defaults.
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