June 24, 2019

NC Debt Collection: Judicial Procedures

Debtor swimming in a sea of sharksOne of the most-searched-for content on my website is “How debts are collected in North Carolina.”  In view of this interest in debt collection, I am going to expand on the earlier posts in a series of posts.

Two general ways to collect debts

There are two general ways to collect debts:

  1. Extra-judicial procedures
  2. Judicial procedures

Extra-judicial procedures involve such things as letters making demand for payment, emails, telephone calls and even personal collection visits.  None of these debt collection methods can force a debtor to pay.  Payment is voluntary.  Although, when debt collection calls come day after day, it can feel like making a payment is anything but voluntary.

With that in mind, if you are being harassed by creditors, see my post on the  Federal Fair Debt Collection Practices Act.

Judicial procedures mean that the creditor will invoke the statutory provisions of the State of North Carolina for enforcing collection of an obligation. This form of debt collection is coercive.  In other words, the creditor can use the law to grab the debtor’s property.  Here is how it works.

How judicial procedures work in North Carolina

The creditor can file a law suit against the debtor.  A law suit must allege the debt and how the debt came into existence.  It is filed in the court along with a summons. 

The summons is issued by the clerk of court and becomes a legal order for the debtor to respond  to the matters raised in the complaint when the summons is served on the debtor. Once the summons and complaint are filed, the creditor is known as the plaintiff and the debtor is known as the defendant.

Who will the money flow to?

Serving the complaint

The basic idea behind service of the complaint is that the defendant is put on notice of the suit and given an opportunity to defend the suit. Unfortunately, because service can be done in a number of ways it is possible that the defendant may not know of the suit until a judgment is entered; yet, the law will regard the service as good.

The traditional way of serving a complaint is by hand delivery to the defendant by the sheriff or a deputy. We have all heard of “ducking service.” The defendant is simply never around when the sheriff shows up.  “Ducking service” is why the rules on service have been relaxed.  In some instances, persons not employed by the sheriff may be authorized to effect personal service.

Service may be accomplished by actual delivery to the defendants by a person authorized to serve and leaving the summons and complaint with a person of suitable age and discretion who resides there.  If left with a six year old, the service would not be good; however, if left with an absent minded spouse—look out.

In addition, registered or certified mail can be used for service. The letter must be sent return receipt requested and signed for by the defendant.

Finally, a summons and complaint may be served by courier service provided that the defendant actually receives the documents and a delivery receipt is obtained.

Answering the complaint

Once service is accomplished, the plaintiff will file the document evidencing the service with the court. At that point, the defendant has thirty days to answer in North Carolina. The time periods vary in other jurisdictions. 

The time period may be extended for another thirty days as a matter of right by motion to the clerk of court. The time can be further extended by the court for good cause. This takes a motion that is heard by the court, the defendant better have real good cause. 

At the expiration of the time for answer and any extension, the defendant must answer the law suit or face a default.

If the defendant does not answer the suit

First, let’s deal with the situation in which the defendant does not answer the suit. In this event, the plaintiff can move for entry of default and a default judgment. 

In the case of an entry of default, the clerk of court will do the entry upon motion of the plaintiff that shows that no answer has been filed. The entry of default deems that all of the things that the plaintiff has complained of are true, and that the plaintiff is entitled to a judgment. 

That can raise one of two scenarios:

  1. A suit on a sum certain
  2. A suit on a sum not certain

The first one involves a suit on a sum certain.  A sum certain is a suit in which the damages are clear.  For instance, the plaintiff is obligated for a credit card debt.  Thus, the amount of the debt is the total of the charges plus accrued interest.  In this case, the plaintiff can move the clerk of court to enter a default judgment. 

The second scenario deals with the situation in which the damages claimed are not a sum certain. For instance a negligence claim based on an auto accident. For example, the defendant crossed the center line of a highway and struck the plaintiff’s car. The defendant is clearly liable. The clerk can enter a default; however, the clerk cannot enter a default judgment as the amount of the damages is not known. 

For sums not certain, a court proceeding called a default and inquiry must be held.  In this proceeding evidence of damages is presented in order for the court to determine the damages. From this determination, an entry of default judgment is made.

Motions that can be filed with or prior to answer

whose money is it?Before we get to an answer, I will briefly discuss some of the motions that can be filed with or prior to answer. Generally, these motions are designed to short circuit an improperly filed suit. 

Among others there a motion to dismiss for failure to state a legal cause of action upon which a suit can go forward, a motion to dismiss for lack of jurisdiction and a motion for a more definite statement. As to the latter, this motion is to require the plaintiff to clearly set out the facts that are the basis for the suit.

These motions are ruled on by the court and an answer does not need to be filed until the court rules on these motions.

Now is the time to discuss the answer.  It is nothing more than a response to the plaintiff’s complaint.  It must address each allegation. Failure to address a point raised by the plaintiff is deemed to be an admission of that point.

The answer may contain a counterclaim. A counter claim is simply a legal claim that the defendant has against the plaintiff.

As an example, let’s suppose the suit is by a contractor on a contract to build a home. The contractor sues alleging that the defendant has not paid the contract amount.  The answer denies that any money is due because of faulty construction work.  The defendant files a counter claim alleging that the contractor backed his truck into the defendant’s auto causing damage for which the defendant seeks to recover.

Pleadings are the answer and counter-claims

The complaint, answer and counter-claims are known as the pleadings. Only the pleadings have been filed, a period of time in which discovery can be conducted begins.


The idea behind discovery is that both sides in a law suit should have the ability to have all the information available from the opposite side before going to trial.  The concept is that there should be no opportunity for “trial by ambush.”

Discovery can take the form of interrogatories, which are written questions to be answered under oath; depositions, questions answered in person before a court reporter; requests for admission, written requests to admit facts alleged by  the other side of the suit, and requests for production of documents among others.

Note that discovery is not required. A party may elect to not do any discovery.

Motion for summary judgment

Once the discovery period has run, the suit is ready for trial or for a motion for summary judgment. Once again, summary judgment is short cut method to end a law suit that does not have a sound legal foundation. It is a request to the court to enter judgment either for the plaintiff or defendant because the law is clear and the facts are clear.  If there is a question of fact, summary judgment cannot be granted.


Assuming that summary judgment is not granted, it is time for the trial. How the trial is conducted is beyond the scope of this post. However, at the end of the trial a judgment will be rendered. 

The judgment may be a money judgment, although it could be something other; for instance, a permanent injunction. If it is a money judgment, the process of enforcing the judgment begins, we are at the same point as we would have been had the judgment been a default judgment that is discussed above.

In Part Two we’ll pick up the debt collection process beginning with a discussion of exempt property.