Legal Question in Credit and Debt Law in North Carolina

The answer depends upon whether you own your home by yourself or with a spouse, and how much personal possessions you own.

It is very likely that if you owe money on several credit cards and you stop paying on the cards, you may eventually be sued and have a civil judgment entered against you on one or more of them, perhaps even all of them. The credit card company has 3 years from default to file the lawsuit. If a judgment is entered, it remains on record for 10 years and can easily be renewed for another 10 years. There is no limit as to the number of times a judgment can be renewed.

If you are married and you own your home together with your spouse (purchased during the marriage), a judgment against you alone is not a lien on the home. If the judgment is against you and your spouse together (joint credit card), it would be a lien on your home. If you are single, a credit card judgment would be a lien on your home.

You would have a right to protect the equity in your home and protect your personal property (furnishings, car, bak account, retirement savings) up to certain limits. In order to do that, you have to timely respond to certain paperwork that is served after a judgment has been entered. Most people do not own personal property such as furnishings that is valuable enough to be taken by a judgment creditor.

If you are in a bad financial situation and you can no longer afford to pay on your credit cards, you should get a consultation from a qualified bankruptcy attorney. The attorney will be able to tell you specifically to your situation, what would potentially happen if you choose not to file bankruptcy.

Attorney Coleman is correct. If you stop paying, the creditors or junk debt buyers have 3 years to sue you generally. The 3 years runs from the time of the last payment. If the creditor gets a judgment against you, the judgment automatically becomes a lien on your home in most cases. While property owned by you and your spouse may be safe from seizure, selling or refinancing may be a problem with an outstanding judgment. Judgments never go away until resolved by paying, settling or getting it discharged in bankruptcy. In order to protect your possessions and equity, you MUST fill out the exemptions which you will receive following the judgment. These papers are called a "notice of rights to have exemptions designated" and "motion to claim exempt property." Don't ignore these. If you do not timely file them then your exemptions are waived.

What you do depends on your circumstances. Bankruptcy has its own consequences, both good and bad. My feelings are that it is a decision which should be weighed after considering the consequences of bankruptcy as well as your assets, income and debts. Many attorneys give free bankruptcy consults and if you have over $10,000 in debt (other than your mortgage) then you should consider it. It costs, on average, about $2000 - $2500 to file bankruptcy after all the attorney fees, filing fees and other miscellaneous fees are added in. So that is why you need to make sure that your debts are substantial enough.

Bankruptcy is not for everyone. It can stay on your credit report for 7 to 10 years and one you file and get a discharge, you cannot refile for 2-8 years (it depends on the kind of bankruptcy you filed). If bankruptcy is not right for you, there are other options. If you have no assets, only exempt income (like Social Security), maybe it makes sense to do nothing. If you have assets and an income stream, consider resolving the debts through debt negotiation/debt settlement. Beware - there are lots of bad actors and not all debt settlement companies are alike. Most require their fees to be paid up front. You can also do the same thing on your own. Debt consolidation is also an option - this is done through non-profit consumer credit counseling agencies which set up a debt management plan. However, many people cannot afford the payment required or experience other issues so sometimes this is not a good option either.

If you want to discuss these options and your circumstances in confidence, I give free consults by email and I charge $50 for a 30-minute phone consult. Please contact me at [email protected] if interested.