The statute of limitations is the amount of time that creditors have to take legal action to recover an unpaid debt. Once the time period allowed by the statute of limitations has passed, debt collectors can still try to collect monies owed, but they cannot file lawsuits against delinquent borrowers or garnish their paychecks. In North Carolina, the statute of limitations for automobile loans, installment loans, credit cards and promissory notes is three years from the date of the last payment or charge.
What this means is that every payment made on a delinquent account resets the clock and restarts the statute of limitations. This is why North Carolina residents who are experiencing financial difficulties should consider their options carefully when deciding which bills to pay and which to allow to fall into arrears. It should also be noted that delinquent payments will usually remain on credit reports for several years after the statute of limitations has passed.
While the statute of limitations prevents creditors from initiating lawsuits to collect unpaid debts, it does not stop them from harassing borrowers for payment. Debt collectors often seek payments that they are unable to recover in court because they know that many consumers are unaware of the statute of limitations. This is why consumers should always ask creditors or bill collectors to provide them with a written notice of the debt in question as required by the Fair Debt Collection Practices Act.
The statute of limitations becomes moot when individuals with unmanageable financial situations file a personal bankruptcy petition. Attorneys with experience in debt relief cases may explain that an automatic stay is issued when a bankruptcy is filed. This is an injunction that orders creditors to cease all of their debt collection efforts. The automatic stay also puts an end to debt-related wage garnishments and lawsuits.
Source: The North Carolina Legislature, Civil Procedure. Subchapter I. Definitions and General Provisions