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Understanding the Rights and Limitations of Creditors

The Crow Law Firm  June 11, 2024

If you find yourself in debt, understanding both your rights as a debtor and the limitations of creditors can empower you to make more informed decisions.  

At The Crow Law Firm, we believe understanding your legal options is the first step toward protecting yourself from unfair debt collection practices and taking control of your financial future. In this article, we’ll explore the rights and limitations that govern the relationship between debtors and creditors in North Carolina. 

The Rights of Creditors

A creditor is any entity or person to whom money is owed. This can include banks, credit card companies, mortgage lenders, utility companies, and even individuals who have provided loans. Creditors have several rights, including: 

  • Right to payment: Creditors can seek payment through various means, both voluntary (negotiation, payment plans) and involuntary (lawsuits). 

  • Right to charge interest: Depending on the agreement and applicable laws, creditors can charge interest on the outstanding debt. 

  • Right to report to credit agencies: Creditors can report delinquent accounts to credit bureaus, affecting the debtor's credit score. 

The Rights of Debtors

Debtors in North Carolina are protected under both federal and state laws. Two of the most significant protections are the Fair Debt Collection Practices Act (FDCPA) and the North Carolina Debt Collection Act (NCDCA).

Fair Debt Collection Practices Act (FDCPA) 

The FDCPA prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debts. It applies to personal, family, and household debts, including money owed on credit cards, medical bills, and mortgages.

Under the FDCPA, creditors must adhere to strict guidelines. They cannot contact you before 8 AM or after 9 PM, nor can they contact you at work if they know your employer disapproves. Additionally, they are prohibited from using obscene or profane language, making threats of violence, or repeatedly calling you to annoy or harass.

North Carolina Debt Collection Act (NCDCA) 

The (NCDCA) provides additional protections at the state level. This act mirrors many of the protections found in the FDCPA but also includes unique provisions specific to North Carolina. For instance, it restricts the times when debt collectors can contact you and prohibits certain types of communications entirely. 

For example, North Carolina law requires that debt collectors provide written notice of the debt within five days of their initial communication with you. This notice must include the amount of the debt, the name of the creditor, and a statement that you have 30 days to dispute the debt's validity.

Limitations of Creditors

Creditors do not have an indefinite period to collect a debt. The statute of limitations limits the time during which a creditor can sue you to collect a debt. In North Carolina, the statute of limitations varies depending on the type of debt: 

  • Written contracts (including most credit card debt): 3 years 

  • Oral contracts: 3 years 

  • Promissory notes: 5 years 

  • Open-ended accounts (e.g., credit cards): 4 years 

After the statute of limitations expires, a creditor can no longer sue you to collect the debt. However, they can still attempt to collect the debt through other means, such as phone calls and collection letters. 

State-Specific Laws for Creditors in North Carolina 

North Carolina has specific laws governing creditors' rights and limitations: 

  • Wage garnishment: Wage garnishment is not allowed for consumer debt. 

  • Interest rates: North Carolina caps interest rates on personal loans at 8% unless otherwise agreed upon in writing. 

  • Debt collection practices: The state follows the Fair Debt Collection Practices Act (FDCPA), which prohibits abusive and deceptive collection practices. Additionally, North Carolina has its own debt collection laws that offer similar protections. 

Creditor Actions That May Violate Debtor Rights 

While creditors have the right to collect debts, they must do so within the bounds of the law. Certain actions, such as threatening arrest, using deceptive practices, or contacting you after you’ve requested in writing that they cease communication, are clear violations of your rights. If a creditor violates these rules, you have the right to take legal action against them. 

Responding to Creditor Harassment and Unfair Practices

If you are facing creditor harassment or unfair practices from a creditor, you can take some practical steps to protect yourself. These steps include:

  1. Keep records: Document all communications with the creditor, including dates, times, and the nature of the contact. 

  1. Request validation: Ask the creditor to validate the debt in writing. They must provide documentation proving that you owe the debt. 

  1. Know your rights: Familiarize yourself with your rights under the FDCPA and NCDCA. 

  1. Send a cease and desist letter: If you wish to stop all communication with the creditor, send a written request asking them to cease contact. Be sure to send it via certified mail and keep a copy for your records. 

  1. Seek legal advice: If the harassment continues or if you believe your rights have been violated, consult with an attorney who can guide you on the best course of action. 

It's important to be proactive in exercising your rights. By understanding and asserting your rights, you create a stronger position to negotiate with creditors and protect yourself against collection abuse.


Can creditors garnish my wages, and if so, how much can they take?

Yes, creditors can garnish wages, but they must first obtain a court order. The amount they can take is regulated by both federal and state laws. Under federal law: 

  • Maximum garnishment: Creditors can garnish the lesser of 25% of your disposable earnings or the amount by which their weekly wages exceed 30 times the federal minimum wage. 

  • Protections: Some states provide additional protections or lower caps on wage garnishment. 

In North Carolina, wage garnishment for consumer debt is generally prohibited, with some exceptions such as child support, taxes, and student loans. 

Can creditors place a lien on my property, and what happens if I sell that property?

Creditors can place a lien on a debtor's property if they sue the debtor in court and obtain a judgment against them. Once the judgment is obtained, the creditor can record a lien against the debtor's property. 

If you sell the property, the lien must be satisfied before the sale can be completed. This means that proceeds from the sale will first go toward paying off the lien. 

Understand Your Rights

For any debtor facing financial challenges, understanding the rights and limitations of creditors can help you protect yourself from unfair debt collection practices and take proactive steps to manage your debt effectively. 

At The Crow Law Firm, we're committed to helping you understand your legal options and protect your rights. Whether you're dealing with creditor harassment or considering bankruptcy, our team is here to support you every step of the way. Financial literacy and responsible debt management are key to overcoming debt and achieving financial stability. 

If you’re experiencing creditor harassment or have questions about your rights as a debtor, contact The Crow Law Firm today. Our experienced attorneys are here to provide the guidance and support you need. Schedule a consultation with us and take the first step toward regaining control of your finances.