Collections Blog Post 1: Getting Paid What You're Owed!

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A.              Introduction

At the Law Offices of Peter D. Isakoff, we fight for workers’ rights to get paid for an honest day’s work.  As a zealous trial lawyer, Attorney Peter Isakoff knows how to navigate the complexities of the legal system to get his clients paid what they're owed.  This blog post is the first article in a law firm blog series on the civil collections process.

Civil collections can be difficult because North Carolina is a debtor-friendly state. The law allows for many generous exemptions from judgment under Chapter 1C, Article 16 (Exempt Property) of North Carolina’s General Statutes, N.C. G.S. § 1C-1601, et seq.  In North Carolina, a private creditor generally cannot garnish wages, and with debtor-friendly laws, in some instances it can be extremely difficult to turn a judgment into cash. Therefore, creditors need to have realistic expectations about collectability when seeking to enforce a judgment in North Carolina.

B.              Settlement Offers and Negotiations

            It is good practice to make all settlement offers in writing, particularly with a pro se defendant.  If a settlement is reached, it should be documented by a written settlement agreement signed by all parties.  Any settlement offers should clearly have “For Settlement Purposes Only” at the top of the correspondence/offer.  The reason for this notation is that settlement agreements, offers, and attempts to settle are generally not admissible as evidence in court, and having this notation provides clear direction in the event the other party attempts to use your settlement offer against you later.  See N.C. Rule of Evidence 408. If a case ultimately goes to trial, prior settlement offers and discussions will generally not be admissible from either side.

C.              Obtaining a Default Judgment

After filing the lawsuit and serving the defendant, the defendant would have 30 days to file an Answer responding to the allegations.  Within that 30-day period, the defendant can also obtain an extension of time to respond.  Especially if the defendant actively defends the lawsuit, it is strongly encouraged that you hire a civil litigation attorney to appropriately prosecute your case.  If the defendant doesn’t respond within the 30-day period, the plaintiff can take a Default Judgment against the defendant for the amount owed.

The N.C. Rules of Civil Procedure provide a two-step process for obtaining a Default Judgment.  The first step is Entry of Default under N.C. Rule of Civil Procedure 55(a).  If 30 days pass after serving the defendant and the defendant has not filed an Answer, you can ask the Court to grant Entry of Default.  This is usually a simple step of sending a Motion and proposed Order for Entry of Default to the Clerk of Court at the county courthouse where your case is pending.  The Clerk’s office will check whether 30 days have passed without an Answer, and if so, the Clerk will sign the Order granting Entry of Default.

Once Entry of Default has been made by the Clerk’s office, you then must move to the Default Judgment stage under Rule 55(b).  In the event of sum certain amounts, the Clerk can also grant Default Judgment without the need for a separate hearing before a judge on the amount of damages (money) owed.  As mentioned above, there is a specific procedure set forth in Rule 55(b)(1) that must be adhered to in order to take advantage of this rule.  Since most ordinary debt collection cases are upon accounts, you should try to take advantage of this procedure. 

In the event the damages are not for a sum certain, you will need to schedule a damages hearing under N.C. Rule of Civil Procedure 55(b)(2).   Damages hearings are scheduled by the Clerk’s office, but take place before a judge.  A judge will then hear evidence about the amount of money owed by the defendant to the plaintiff, and upon satisfactory evidence, will enter a Default Judgment for the amount owed.

D.              Handling of the Late Filed Answer

Especially with defendants that are unfamiliar with the legal process, you will sometimes have a defendant file an Answer after the 30-day period has passed. See N.C. Rule of Civil Procedure 12. The standard for granting relief from an entry of default is good cause under N.C. Rule of Civil Procedure 55(d).  Once a default judgment has been entered, a party seeking to be relieved must do so under N.C. Rule of Civil Procedure 60(b). The standard for granting relief from a default judgment under Rule 60(b) is more rigorous than the “good cause” standard established in Rule 55(c).  Rule 60(b) requires a more particularized showing of mistake, inadvertence, excusable neglect, surprise, newly discovered evidence, fraud, misrepresentation, or “other misconduct of an adverse party.” N.C. Rule of Civil Procedure 55(d).  The different standards under the two rules emphasizes that it should be more difficult for a party to avoid default once a final default judgment has been entered, as opposed to simply a clerk’s entry of default.   For a thorough discussion of the interplay between the two standards, see Bailey v. Gooding, 60 N.C. App. 459 (1982).

It is good practice to calendar an extra week to ten days to allow for mail and other normal delays.  If there has been an entry of default but no judgment rendered when the late-filed answer is delivered, it is likely the trial judge will set simply grant an enlargement of time under Rule 6(b) and set aside the entry of default under Rule 55(d).  Judges are extremely reluctant to end a defendant’s case on a technicality such as failure to file a timely answer.  However, if a default judgment has been obtained, the likelihood of this judgment standing has greatly increases under Rule 60(b). 

E.               Conclusion

Stay tuned for upcoming articles in this “Collections” blog series covering other aspects of the civil collections process.  If you need legal assistance getting paid what you’re owed, please feel free to contact The Law Offices of Peter Isakoff anytime, day or night, at (336) 863-8348 (Main) or (336) 864-9115 (Español).

DISCLAIMER: The information in this article is provided for informational purposes only. It is not offered as and does not constitute legal advice. The accuracy of the information may change pending changes in applicable law. If you have questions about a specific matter, you should contact a lawyer. The use of this article or any information provided in it does not establish any lawyer/client relationship.