Statute of Limitations on Collecting Debt in North Carolina

Every state has a statute of limitations on debt collection -- a maximum amount of time after which the creditor may not sue the debtor in court to get his money back. In North Carolina, the statute of limitations for most debts is three years. However, different circumstances affect how and when the statute applies.

Written Contracts

The statute of limitations on collecting debts is 3 years if the debtor signed a written contract with the creditor. This includes most credit card debts, as the debtor must sign an agreement with the card issuer prior to using credit. The statute of limitations applies to the date the debtor defaults on the debt, not the date the debtor incurs the debt.

Extension of Statute of Limitations

If a North Carolina customer makes a payment on an open account, such as a credit card account, it extends the statute of limitations on all purchases on the account in the past three years. If the debtor defaults on his payment, each item purchased using the account over the past three years will have a different statute of limitations depending upon the date of purchase and the date a payment was last made on the purchase.

Judgments

If a debtor defaults, the creditor can get a judgment against him in court requiring him to repay the money. The judgment is enforceable for 10 years from the date the judge enters it into the record. Partial payments on the account do not affect this statute of limitations.

Suspension of Statute of Limitations

If a debtor files bankruptcy, or if she dies before repaying the debt, the statute of limitations is tolled, or suspended. During the suspension of statute of limitation, the time that passes does not count against the statute of limitations. For example, if a person declares bankruptcy and a year later a bankruptcy judge rules that a particular debt cannot be discharged via bankruptcy, the year that has passed does not count against the statute of limitations for collecting the debt.

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What Loan Options Are Really Available for Debt Consolidation?

Consolidating debt usually means combining all your different credit accounts and loans into one loan with an overall lower interest payment. In addition to saving money on interest, debt consolidation is also convenient, because it leaves you with only one payment to keep track of instead of several. If you are looking to consolidate debt, there are a few loan options available.

Borrowing Against Home Equity

If you have a significant amount of equity in your home there are a couple of different loan options you could use to consolidate debt. One option is to do what's called a "cash-out" refinance. Say you owe $50,000 on your mortgage and your home is worth $100,000. You could refinance and cash out all but 20 percent of your equity. This would leave you with a mortgage of $80,000 and $30,000 to pay off your debt.

Another way to use your home equity to consolidate debt is to take out a home equity loan. This is essentially a second mortgage. Assuming the same scenario in which you owe $50,000 on a $100,000 home, you could get a second mortgage for $30,000 to pay off your other debt.

Credit Card Balance Transfer

If the debt you want to consolidate is mostly small, such as credit card debt or perhaps a car loan, you could consolidate by transferring it all to one credit card. Credit cards often offer low initial rates on balance transfers, giving you up to 12 months and sometimes longer to pay off the balance before higher interest rates kick in. This can save you a considerable amount on interest costs. One drawback to this option is that credit card companies usually charge a fee to transfer balances that can be as much as 5 percent of the balance you are transferring.

Personal Loan

If you don't own a home, or lack sufficient equity, and you either can't or don't want to consolidate debt on a credit card, a personal loan may be an option. Personal loans carry higher interest rates than home equity loans, according to Lending Tree, but they may still be lower than your credit card interest rates. The loans also are often unsecured, meaning they are not backed up with any collateral, which means you will need a fairly good credit score to qualify. Pat Curry of Bankrate.com suggests applying for a loan at a credit union because they often have lower interest rates and fees than banks.

Borrowing From Investments

If you have a 401k account or a whole life insurance policy, you may be able to borrow from these to pay off debt. Inquire at work about whether your 401k provider offers loans. The advantage of borrowing from your 401k is that you are paying the loan back to yourself, with interest. The disadvantage is that you lose the earning power of the money you take out, which could lower your retirement nest egg in the long run. A 401k loan also has short repayment periods, with five years being the max, according to Bankrate.com.

Borrowing from a whole life insurance policy may be a better option. You can borrow against the cash value of the policy and have an unlimited time frame in which to pay it back. If you die before the loan is paid back, your insurer will subtract the balance from the insurance benefit it pays.

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Do Slow Pays on Mortgage Affect Your Credit?

Depending on your financial circumstances, your mortgage payment can represent a substantial portion of your monthly expenses. If you lose your job or experience a reduction in income, you may have difficulty making your mortgage payments on time. However, failing to make timely payments, also called slow paying, on your mortgage loan can affect your creditworthiness in several ways.

Late Payment Reporting

Paying your mortgage within 30 days after the due date will not impact your credit score. However, if you pay more than 30 days after the due date, your mortgage lender may report your slow payment to Experian, TransUnion and Equifax, which are the primary credit reporting agencies in the United States. A 30-day late payment report can lower your credit score; however, repeated late payments and 60-, 90- and 120-day late payment reports can have a more dramatic effect. The exact effect of late payments on your credit score depends on how high your score was before you fell behind on your payments.

Foreclosure

If you continue to fall behind on your payments -- usually between 60 and 120 days late, although time frames vary by lender -- your mortgage lender may consider your loan to be in default. It will send a demand letter stating that you must bring the loan current to avoid foreclosure. If you not pay the past-due balance within the time frame stated in the letter, the mortgage lender may foreclose on your home. This means that it sells your property at an auction and forces you to move out. A foreclosure can further lower your credit score, which was likely already damaged by late payments leading up to the foreclosure action.

Deficiency

You may assume that if your lender forecloses and sells your home, you are free from any further financial obligations. However, the lender may not sell the home at a price high enough to cover your loan balance. If the selling price is less than your balance, you are responsible for the difference, called a deficiency. The lender can attempt to collect, and even sue you for, the deficiency amount. However, state laws vary regarding requirements for deficiency judgments. Failing to pay or incurring a lawsuit for a foreclosure deficiency can add to your credit damage.

Minimizing Credit Damage

Contacting your lender before you fall behind on your mortgage payment is an effective strategy for minimizing or preventing credit damage. Your lender may grant a temporary payment forbearance or deferment to help you through a short-term financial difficulty. It may offer refinancing options to extend your loan terms and allow you to save money through lower interest rates. You may also qualify for a loan modification, which reduces interest, forgives part of your loan balance or extends your loan repayment time frame to lower your payments. If a lender forgives a portion of your loan through a modification, it may report a debt settlement to the credit bureaus; however, the impact is less dramatic than a foreclosure or deficiency lawsuit.

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How to Handle Problems With Debt Consolidation

While debt-consolidation companies can help people with unsecured debts avoid bankruptcy, they often have strict payment guidelines for their clients. Clients who have difficulty complying with their debt-consolidation plans could face lawsuits, liens on their property, and they might see their credit scores affected.

Instructions

1

Read the terms you agreed to when you consolidated your debt. Before you take any formal actions against your debt-consolidation company, review the terms of your contract and make sure you fully understand each party's obligations.

2

Provide documentation of your situation. If you are having problems with your debt-consolidation payments because of job loss, health problems or other circumstances, provide written details of your financial difficulties.

3

Get any agreements in writing. Before you agree to any modifications to your debt-consolidation plan, ask for a written copy of the new agreement and read it carefully before executing it.

4

Talk to a bankruptcy attorney. If you are unable to resolve your debt-consolidation problems yourself, consult with a bankruptcy attorney or a lawyer who specializes in financial matters. They can outline your rights and give you advice on how to proceed.

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Credit Card Assistance Programs

If you are swimming in credit card debt, you may have the lingering feeling that you could drown at any moment. You are not alone in the battle with credit card debt. Credit card assistance programs are available for those who need help to get their debt under control and their budget back on track.

Debt Settlement

If you have difficulties making the minimum monthly payment on a credit card bill, debt settlement programs speak to credit card companies on your behalf. They work to help reduce the balance you owe and/or the interest rate you are paying. The theory behind this credit card assistance program is that credit card companies would rather receive less money than expected instead of no money at all.

Credit Card Assistance Programs Through Credit Card Companies

Credit card companies may have debt settlement programs that consumers can access directly without the aid of a third party. Call your credit card company, explain your financial situation and let the creditor know that you want to make payments, but sometimes find it difficult. With this information, the credit card company can create a plan that offers low interest rates and/or lower monthly payments.

Debt Consolidation

Debt consolidation programs come in the form of personal loans that you use to pay off all your credit card debts. Combining your outstanding credit card debts allows you to have only one loan; therefore, you only owe money to one institution. Additionally, debt consolidation programs can offer lower interest rates than those found on credit cards.

Credit Counseling

If money management is a foreign concept to you and you find yourself with credit card debt consider seeking the assistance of a credit counseling program. According to the Federal Trade Commission, a good credit counseling program provides you with a certified credit counselor who can help you find the solutions to your credit card problems. Solutions include creating ways to help you manage your money and debts, develop and implement a budget and attend free workshops.

Debt Management Plans

If your credit card debt comes as a result of poor spending decisions or an inability to pay your debt, a debt management plan may be a good long-term solution. A debt management plan pairs you up with a certified credit counselor who can help you create a budget and teach you money management techniques that will help you take control of your debts in a short amount of time and avoid unnecessary spending in the future.

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What Companies Report to Credit Bureaus

Credit bureaus are companies that compile information about your financial history and report it to potential lenders who are trying to determine whether or not to issue you a loan.

Banks

Banks that have issued you a mortgage or other type of loan will inform credit card companies whether or not you made your payments on time.

Credit Card Companies

Credit card companies report your credit limit, balance and whether your payments are current.

Utilities

Utilities like gas, electric and water will report whether or not you are current with your payments.

Installment Loan Issuers

Companies that have issued you an installment loan such as monthly payments for a new television will report your payments or lack thereof.

Collections Agencies

If you have had a collections agency used against you to collect money you owe, it will report whether or not you paid your debts.

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How to Get Out of Debt in 5-7 Years

Getting rid of your debt and staying debt-free will give you such peace you will never want to be a slave to these types of bills again. You do not have to pay a financial counselor to be able to become debt-free in five to seven years. There are common-sense steps you can do that will enable you to dig out of this hole on your own. The keys are patience, consistency, determination and to write your goals down.

Instructions

1

Begin by tracking your money. Write down every penny that comes into the household for one month. Also, write down every penny that you and your loved ones spend. Remember to jot down allowances for bills you pay semi-annually or quarterly, such as insurance payments and budget that amount in every month. Make a list of the financial goals you want to accomplish, and track the growth every month.

2

Make a budget for everyone in the home. Allow enough money for necessary expenses and then a small amount of money for each member to spend freely. When they have extra money to buy something they really want--as opposed to something they need--they can either use it each month, or save for an even larger luxury. Make everyone accountable for his expenditures and stick to the budget no matter what.

3

Cut expenses everywhere you possibly can. Make your own lunches and snacks for work or travel. Avoid restaurants and fast food, except on very special occasions. One meal at a nice restaurant will eat up almost half the amount of money it takes to prepare meals at home for a week. Clip coupons and use them only for items you would have purchased anyway. Eliminate cable TV and extra phone lines. Fill in your family's free hours by playing board games and doing outdoor activities together. This will definitely create more loving memories than if your family time is spent in front of the TV. You will be amazed at how quickly you can build wealth by saving a few pennies or dollars each day.

4

Save up for emergencies. The daveramsey.com website recommends that you save at least $1,000 in an easily accessible account, such as a money market fund. This savings account is to be used only for emergencies. A true emergency is car troubles; going out to eat at a nice restaurant with friends is not.

5

Pay off your credit cards. This may seem to be an impossible task, but it can be done and quickly. Start by making the least amount of payments you can each month on every credit card. The statement will list a minimum payment required, and this is what you must pay. Choose which card has the lowest balance and spend every extra penny on bringing down this balance. It should only take a few months to wipe this one out, and then you can use that money you do not have to pay on this credit card each month to pay even more on the second highest credit card balance. Keep doing this until they are all paid off. The rewards and points you get on these cards do not benefit you nearly as much as the interest you save by not having a payment.

6

Begin building a savings that will cover three to six months of living expenses once you have paid off the credit cards. No one is exempt from troubles, especially in this economy. Lay offs, job terminations, illnesses and accidents can all result in financial difficulties that can wipe you out financially and send you on the path to bankruptcy. Do not touch this fund for minor emergencies--that is why you have the $1,000 in the money market account.

7

Start building a retirement fund or invest in a Roth IRA. After building your three- to six-month savings, you can build the retirement fund by investing at least 15 percent each month. If you are lucky, old age will catch up with you and you want to be worry-free financially when you reach the golden years.

8

Sink money into a fund to pay for college expenses for your children. If you are lucky enough to be able to start this while they are in elementary school or even earlier, the money will grow rapidly. Learn about the 529 plans and Education Savings Accounts; you can invest your money in those tax-free.

9

Realize that once you have gotten these last steps started that it is time to make double and triple payments on your mortgage. If you cannot make double payments, pay as much extra as you possibly can. Remember, you have your two emergency funds already full if an unexpected life event occurs. You can now afford to get rid of your biggest payment of all. Most people can easily eliminate credit card debt within one or two years of starting this plan, and paying off your house within five to seven years is also possible. You do not hear of this often because people do not want to scrimp and save for a few years to accomplish this, but can you imagine the wonderful satisfaction and peace you will feel to know that you do not have this payment?

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