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Understanding the Rights
and Limitations of Creditors

Richard L. Cannon III March 28, 2022

With all the economic ups and downs of the pandemic, it’s not usual for people and businesses to have suffered financial setbacks.

Maybe you had to skip credit card payments or just pay the minimum while juggling who else to pay and when. Now, your phone is ringing off the hook, text messages are flooding you, and emails abound. They want your money to make good on your promise to pay. What to do?

Fortunately, there are legal bounds that creditors and their collection agencies must observe, but as a consumer, you can also exercise your rights under bankruptcy protection. It can be a tough choice to make. Bankruptcy is a frightening word that many equate with losing everything, but that’s rarely the case. Instead, filing for bankruptcy offers a fresh start financially and in your private life.

If you’re in or around Greenville, North Carolina, and debts are overwhelming you, contact Cannon Law Offices, PLLC for guidance and legal options on how to resolve your situation.

You may just need to consolidate your debts, or you may need to seek bankruptcy protection, but regardless, you need to take action. We can help you as we have many others throughout eastern North Carolina, including the Outer Banks, Wilmington, Hyde County, and Washington County.

Consumer Rights Protections Under the Law

Both federal and state laws protect the rights of consumers to be free of harassment and unethical acts by creditors and their collectors.

The Fair Debt Collection Practices Act (FDCPA) protects consumers but not businesses against credit collector practices. It limits the hours creditors can call or contact you – not before 8 a.m. and not after 9 p.m. They also cannot call you at work. You have a right to request that they quit contacting you. Of course, they still have the option of suing you for the money owed to them.

The Fair Credit Reporting Act (FCRA) regulates the actions of consumer credit reporting agencies (CRAs) like Equifax and others, large and small. The legislation requires the CRAs to both keep consumers informed of their credit information being stored and also to verify information disputed by consumers.

The Fair and Accurate Credit Transactions Act of 2003 allows consumers to receive one free credit report each year.

The Truth in Lending Act (TILA) is aimed at preventing unfair and deceptive practices by banks and other lenders. It requires full disclosure of all costs and fees associated with a loan, including interest payments and other costs to be paid over the term of the loan, at the time of signing the promissory note. It further gives consumers a three-day right of rescission when it comes to loans and mortgages affecting their residence.

In North Carolina, there is a statute of limitations concerning how long a creditor has to file a lawsuit to recover money owed them. The limitation is three years from the time you made your last payment. However, you are required to appear in court and raise that defense if someone sues you after the statute of limitations has expired. It is not automatic.

Collection Practices

The Federal Trade Commission (FTC) enforces debt collection activities, and it limits what creditors and collection agencies can do. For instance, they cannot:

  • Harass you with endless phone calls

  • Pretend to be attorneys or government agencies

  • Use profane or threatening language

  • Threaten that you’ll be arrested for not paying your bill

  • Contact your friends about your obligations

  • Publicly shame you on social media or otherwise, even on postcards or letters

Bankruptcy and Its Automatic Stay

The bankruptcy code provides probably the ultimate solution to creditors’ calls and collection efforts with its provision of an automatic stay. Once you file for either Chapter 13 or Chapter 7 of the bankruptcy code, the court will order creditors to cease all activities, even if they’ve filed lawsuits. The automatic stay will remain in effect for all debts covered by the code for as long as the bankruptcy proceedings take.

However, the stay can be lifted by a creditor's request for secured obligations, such as car and home loans. Unsecured obligations, such as credit cards, will be a matter of how the bankruptcy proceeds. Under Chapter 13, you will be required to use any disposable income you have – which is why Chapter 13 is called “the wage earner’s plan” – to pay creditors for three to five years. Even if you only pay a portion of what you owe, you will be discharged from your unsecured debts after those three or five years.

Under Chapter 7, your nonexempt assets will be sold to pay off creditors, and you will be discharged as soon as that process is over, usually in six months or so.

In North Carolina, bankruptcy allows some exemptions for home equity, your vehicle, personal property, and tools of the trade. In all bankruptcy filings, retirement accounts, qualified college savings accounts, Social Security, unemployment, and other public benefits are also exempt.

How a Knowledgeable Attorney Can Help

Facing debts that you can’t manage is a tough situation, emotionally and financially. There are ways to mitigate the creditors’ tactics, but ultimately, you probably need to either negotiate a better repayment plan or seek help through the bankruptcy system.

Cannon Law Offices, PLLC helps residents and families throughout Greenville and eastern North Carolina navigate the legal system to emerge from overwhelming debt obligations and achieve a fresh start in life. Contact us immediately if you’re facing an unmanageable debt load.