Legal Question in Credit and Debt Law in North Carolina

If you are sued on a debt in North Carolina and have a money judgment entered against you, there is no wage garnishment allowed by law. The chances of getting your wages garnished are slim (the legislature could always pass a law allowing wage garnishment in the future). The cheapest settlements are lump sum. In my experience AMEX will offer you a monthly pay plan but it won't be much of a "settlement", it will probably be a pay in full. Remember, any settlement where $600 or more of debt is forgiven will result in a 1099C being issued for the amount of forgiven debt. The same thing happens if a credit card company determines your debt is uncollectible and issues a 1099C. This is considered "income" and may result in a tax bill - either no tax refund or less than usual, or a tax bill. You should have a personal consultation with a qualified bankruptcy attorney before you make this decision, because you may be able to keep the car and the motorcycle and avoid having "garbage credit" for 7.5 years as well as that unexpected tax bill by filing for bankruptcy.

I agree with Attorney Coleman. The chances are, barring a change in the law, 100% that your wages will not be garnished for the American Express debt. There is no wage garnishment in NC for things like credit card debt.

American Express will settle - I have dealt with the law firms they typically use in NC. The best option, as noted by Attorney Coleman, is to settle lump sum. Creditors will not settle with you if you are current on your debts. You need to default. Then you may get settlement offers. I would suggest that you start saving money now. Once you default, the debt will be sent out to a debt collector after 90 days. It stays at a collector for 90-180 days (roughly - there are always exceptions and no onee can predict what will happen in your case). Most lawsuits, if they occur, are most likely to happen within 1-2 years of default/date of last payment on the debt. Lawsuits are not likely after 3 years because the statute of limitations bars suits over 3 years of age. If 3 or more years passes without suit, there is no benefit to settling.

If you are sued, its not a big deal. To collect a creditor must first serve you with documents called a notice of rights to claim exemptions and motion to claim exempt property. Do not ignore those. Get help in filling those out. You can protect your bank account and any other assets owned free and clear by doing that. Judgments can be settled at any time when you have the funds. Typically, American Express wants 60% to 80% of the balance to resolve on legal/judgment accounts, although this may depend on circumstances unique to your case.

What Attorney Coleman said about a 1099c is true. However, not all creditors issue 1099cs when you settle a debt. And even if you receive one, you may be able to exclude some or all of the forgiven debt using form 982. Do not worry about 1099cs now. If you get one, then you need to talk to a real CPA (not H&R Block or a place like that) to get help on seeing whether you can use form 982 to exclude the income. At most, you will only have to pay taxes on a percentage (depends on your tax bracket - most people are in the 25% to 30% range that I see) of the forgiven debt. If you settled the $5500 account for $3000, then you would be taxed on $2500. The taxes would not be that much.

I have articles at my website (www.rachelhunterlaw.com) on 1099c's and on your options for dealing with debt. I can help you with the exemptions for a reasonable fee if a judgment is entered. I can also consult with you about your credit card and other debt and can undertake resolution of it when you have the funds if that is what you want to do. Please contact me at [email protected] if you are interested in any of these services.