Legal Question in Credit and Debt Law in North Carolina

Not sure what your question is. The creditor does have a right to seek the deficiency. You may have certain defenses, work out a settlement, declare bankruptcy, etc . You really need to speak with an attorney to learn about different options and what you need to do to answer the complaint. That complaint must be answered within 30 days or else they will get a default judgment against you really quickly. You also need to be careful how you answer it or they will get a summary judgment against you.

You will have to decide whether it is best to file bankruptcy or not. There is no wage garnishment in NC. However, judgments last for 10 years and can be renewed for another 10 years. They also earn interest at a rate of 8% per year. The judgment acts as a lien on your real property which means that if you sell it, the creditor will have to be paid out of the sale proceeds, but it depends on how much equity is in the house, whose name is on the deed and whose name the car debt is in.

You should only answer the complaint if one or more of the following are true: (1) the statute of limitations has expired (in NC its 3 years and would start to run from after the car was sold and a demand was made on you for the balance, which you do not share); (2) you already paid; (3) the complaint does not attach certain documents or you have other defenses (like lack of jurisdiction or challenges to venue or service) or the complaint states the wrong amount owed; or (4) you are the victim of identity fraud.

If none of these are true and you owe the debt, then you can answer or do nothing. Either way the creditor will get a judgment against you, whether by default or summary judgment.

Bankruptcy can be filed at any time, although it is somewhat easier if you file before a judgment is entered. I suggest that you not waste time and money fighting the lawsuit if no defenses exist and get a consult with a bankruptcy attorney.

If you want to work out a settlement, you have to have at least 50% of the funds to do a lump sum settlment. Some creditors will want the full balance if you want to make payments. And the payments may be in the neighborhood of 1% to 2% of the debt. If all you can afford is $5 per month, that is not realistic for a $20,000 debt and you are better off filing bankruptcy. If you can afford payments, that will prevent them from trying to execute (collect) on the judgment.

You can make payments directly to the clerk of court after entry of judgment. If you do this, you have to pay at least the monthly interest and something on the principal so that the balance will decrease.

If you just cannot afford it, are judgment proof (which I do not know as I do not know your assets and debts) and if bankruptcy is not an option, then you may just want to do nothing. You will eventually be served with a form called a "notice of rights" and "motion to claim exempt property." Do not ignore this form. It is very important. If you need help, then contact me or another attorney for help in filling it out.

In the meantime, start saving your money, preferably at an online or out of state bank, small community bank or credit union that is 25-50 miles from your house. Do not keep a large amount of money in a bank account at any bank as the creditor will grab it. When you get enough, you can settle the debt at any time.