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The statute of limitations on debt in North Carolina is three years, according to N.C.G.S. § 1-52 (1). If your creditors want to sue you over unpaid debts, they have three years from when you defaulted on the debt . Therefore, any lawsuit filed more than three years after that date is not legally valid and should be rejected by the courts. A bankruptcy lawyer can explain more about how this impacts your rights.
How Statutes of Limitations Work
A statute of limitations is any law that restricts the amount of time one has to take legal action against an individual or entity that has allegedly done them harm. In North Carolina, the time limit is three years for anyone wishing to sue over a breach of “contract, obligation or liability arising out of a contract, express or implied.”
How is this statute relevant to debt collection? When someone loans you money, you usually enter a contract with them, which specifies:
- How much money they have loaned you
- How much time you have to pay the money back
- What rights each party has if the other does not hold up their end of the agreement
If you fall behind on your payments or otherwise breach this contract, your creditors have the right to file suit under this particular law.
There are a few situations where this statute of limitations does not apply to debt collection. For example, in a wrongful death action, the aggrieved party may have less time to file a suit, per G.S. § 1-53(1).
Being Sued Over Debt
Creditors have the right to sue over unpaid debts to protect their interests and extend their time frame to legally enforce and collect the debt. This law, in some respects, can place more significant pressure on debtors who:
- Fully intended to pay what they owed but ran into unforeseen financial difficulties
- Are struggling with substantial amounts of debt from student loans, medical bills, or other types of debt
- Could pay their debts if given a little more leeway from their creditors
If you are in such a situation, finding out that your creditors have decided to sue you can only make you feel worse. You have several options to avoid such an outcome or end the legal action as quickly as possible.
Hire a Bankruptcy Attorney
First and foremost, it is a good idea to consult with a bankruptcy attorney before you take any steps on your own. Even if you decide not to file for bankruptcy, they would be able to:
- Explain how each possible option applies to your situation—and advise you on which may be best for you
- Attend all meetings with your creditors and the court, either by your side or on your behalf
- Use their knowledge of, and experience with the law to educate you about your rights and get you the best deal possible.
Renegotiate Your Debt
Creditors often do not want their debtors to go bankrupt any more than the debtors do: bankruptcy would mean they get less than what they are owed or even nothing at all.
This is good news for people in debt, as it means their creditors may be more likely to alter the terms of their agreement to help them pay their debts. This could include:
- Consolidating debt
- Reducing what you owe
- Giving you more time to pay your debt
File Bankruptcy
If other options are not working out, bankruptcy might be the right choice for you. There are several types (called chapters) of bankruptcy available to those who cannot pay their debts. According to the U.S. Courts, available chapters include:
- Chapter 7, for those who cannot pay what they owe and need to have certain debts discharged (meaning you do not have to pay them back)
- Chapter 11, typically for businesses that need to reorganize their finances and operations
- Chapter 12, for family farmers and fishermen who are still earning income and can repay what they owe within the structure of a repayment plan
- Chapter 13, for individuals who are capable of coming up with a repayment plan and paying their creditors back over a period of three to five years
The process of filing bankruptcy can be complicated, and it is certain to be very stressful. In addition, for all that bankruptcy can help you out of a bad situation, it may have long-term consequences on your credit score and financial options.
Having a lawyer by your side can reduce your burden, allowing you to think more clearly and make smarter decisions.
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Get Debt Help from a North Carolina Bankruptcy Lawyer Today
Farmer & Morris Law, PLLC understands all of the laws that impact debt and bankruptcy in North Carolina, including the statute of limitations on debt. Call us for a free consultation. We would be happy to review your situation and your options for rebuilding your financial life.
