Creditors'
Rights
How
can I collect on a judgment in North Carolina?
ANSWER: If
a judgment debtor fails to voluntarily satisfy a judgment then
the creditor may issue execution.
Execution is the process whereby the sheriff forecloses
upon the real and personal property of the judgment debtor in
order to satisfy the judgment. If the judgment debtor is an individual, a creditor must
first afford the judgment debtor the opportunity to claim
certain property as exempt from execution prior to issuing
execution. There
are specific guidelines as to what property may be claimed as
exempt, and specific time deadlines as to when a judgment
debtor may claim its objections and when a creditor may object
to the same. If
the judgment debtor timely claims his exemptions, then
execution may proceed against the non-exempt property of the
judgment debtor. If
the judgment debtor is not an individual, but rather an entity
such as a corporation or limited liability company, then the
judgment debtor does not have the right to claim property as
exempt. A
creditor may also enforce its judgment by means of the lien
that attaches to the real property of the judgment debtor.
Interested judgment creditors should communicate with
an attorney in order to discuss all of the collection options
available and the best course of action.
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How
long are judgments valid in North Carolina?
ANSWER: A
judgment is valid under North Carolina law for 10 years from
the date of entry, and may be renewed for another 10 years if
the proper procedures are followed.
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How
and when does a judgment become a lien against property?
ANSWER: A
judgment attaches automatically and instantly as a lien
against the real property of the judgment debtor, and
continues as a lien against the debtor's real property as long
as the judgment remains valid (up to twenty years).
Further, if a judgment debtor attempts to sell real
property subject to a judgment lien, the property will remain
subject to the judgment lien unless it is satisfied at
closing. As a
practical matter, a lender will likely require that any
judgment lien on real property be satisfied at closing or in
the event of a refinancing of the property.
A judgment becomes a lien against the personal property
of a judgment debtor upon execution by the sheriff.
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At
my divorce hearing, a judge ordered that my ex-spouse was to
be solely responsible for continuing the payments on a debt.
Am I no longer responsible to the creditor for the debt?
ANSWER: No.
Separation agreements, divorce decrees, or equitable
distribution orders do not modify, cancel, or override your
pre-existing contracts and credit agreements with a creditor.
Such agreements are binding between yourself and your
ex-spouse, but as your creditors are not parties to the
agreements, such agreements do not affect the earlier
agreements that you entered into with a creditor.
Thus, although you may have a right to seek
reimbursement from your ex-spouse based upon a post marital
agreement entered into between the two of you, you are still
responsible to creditors for the debts to which you are a
party.
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What
remedies are available to a general contractor who has not
been paid?
ANSWER: In
addition to a traditional breach of contract action, North
Carolina General Statutes Chapter 44A provides the general
contractor (a party who contracts directly with the owner)
with the right to assert a specific lien on the real property
that the general contractor improved.
The power of a lien rests in the fact that it provides
the contractor with the final remedy of foreclosing on the
real property to pay off the amount owed, and thus gives the
contractor superior leverage.
The lien rights provided by Chapter 44A relate back to
the first date of the contractor's
furnishing of materials or labor on the project. However,
they remain inchoate until perfected pursuant to the statute.
Chapter 44A provides specific procedures and deadlines
necessary for a contractor to perfect its lien rights, and it
is recommended that a contractor consult an attorney as soon
as it foresees a problem with getting paid in order to ensure
that it does not lose the valuable lien rights available under
Chapter 44A.
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Are
subcontractors entitled to a lien in North Carolina?
ANSWER: As
with general contractors, North Carolina General Statutes
Chapter 44A likewise provides subcontractors (a party who
contracts with one other than the owner) with lien rights in
addition to their traditional breach of contract remedies.
Specifically, Chapter 44A provides two distinct lien
rights to subcontractors: (1) a traditional lien on the real
property improved; and (2) a lien on funds. As for the traditional lien, the subcontractor's lien is
similar to the general contractor's lien in that it attaches
to the real property of the owner.
However, under Chapter 44A subcontractors are only
entitled to a "lien by subrogation."
That is, the subcontractor is only entitled to enforce
the lien available to the general contractor, and so its lien
is limited to the amount owed to the general contractor by the
owner at the time the lien is filed.
Further, the lien rights of a subcontractor can be cut
off by payment to the general contractor.
As with the lien available to general contractors,
Chapter 44A provides specific procedures and deadlines in
order for a subcontractor to perfect its lien rights, and the
rules are different depending on whether the subcontractor is
a first, second, or third tier subcontractor.
Thus, it is recommended that a subcontractor consult an
attorney as soon as it foresees a problem with getting paid to
ensure that it protects the lien rights available to it under
Chapter 44A.
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What
is a lien on funds?
ANSWER:
In addition to the
subrogation lien discussed above, Chapter 44A also provides
subcontractors with a lien on funds.
A lien on funds attaches to the funds owing to the
party the subcontractor contracted with as opposed to the real
property improved. Thus,
a first tier subcontractor that has not been paid is entitled
to a lien on the funds due and owing the general contractor
from the owner, if it follows the necessary steps. Likewise, a second or third tier subcontractor is entitled to
a lien on the funds due and owing the party with which it
contracted, and is subrogated to the lien on funds available
to that party, if it follows the necessary steps.
If after receiving the requisite notice, a party makes
a payment despite receiving the notice of claim of lien on
funds, the lien not only continues as to the funds in
possession of the subsequently receiving party, but also the
party that makes the wrongful payment is liable to the
subcontractor asserting the lien to the extent of the wrongful
payment. There
are specific steps that a subcontractor must take in order to
perfect its lien on funds, and as it only attaches to funds
due and owing after the steps are taken, it is suggested that
a subcontractor contact an attorney immediately upon a default
in payment in order to protect its rights.
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What
steps are necessary to protect and assert lien rights in North
Carolina?
ANSWER:
In
order to perfect traditional lien rights in North Carolina, a
Claim of Lien against the real property must be filed in the
county in which the property is located and must be served
upon all parties in the construction chain.
Chapter 44A mandates what information must be contained
in the Claim of Lien and is strictly enforced. If the Claim of
Lien is not in compliance with the statute the Clerk of Court
may reject the lien or the Court may later refuse to enforce
it.
Thus, it is suggested that a contractor or
subcontractor contact an attorney in order to ensure
compliance with the statute.
Chapter 44A further requires that a lawsuit be filed
within a specified time period in order to enforce the lien,
or the lien will be discharged.
In
order to perfect a lien on funds, a subcontractor must serve a
Notice of Claim of Lien on Funds on all parties to be bound by
the lien. The
Notice of Claim of Lien on Funds need not be filed with the
Court. The lien
takes effect upon receipt by the obligor.
As with traditional liens, Chapter 44A provides
specific information that must be contained in a Notice of
Claim of Lien on Funds, and failure to comply with the
statutory mandates will prevent the lien on funds from
attaching. Thus,
it is recommended that a subcontractor contact an attorney in
order to ensure that the requirements are complied with.
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What
are the time limits for asserting lien rights under North
Carolina law?
ANSWER:
With regard to traditional
liens, there are two deadlines that must be complied with.
First, in order to perfect its lien a party must file
its Claim of Lien against the real property within 120 days
after it last furnished materials or labor on the project.
The date of last furnishing does not include punch list
work. Further,
the party must also file a lawsuit in order to enforce its
lien within 180 days of the date of last furnishing.
If the party fails to file the lawsuit within the
required period, then the lien is discharged.
As the filing of a lien and the institution of a
lawsuit to enforce the lien involves a significant amount of
research regarding the property and the parties within the
chain of contract, it is recommended that one contact an
attorney as soon as possible within the 120 day period after
the date of last furnishing in order to ensure that there is
sufficient time to obtain the required information and timely
file the lien.
There
is no time limit for the serving of a Notice of Claim of Lien
on Funds. However,
as the lien on funds only attaches to the funds owed to the
party up the chain of contractors, a subcontractor needs to
serve the notice while there is still money owed up the chain.
Thus, it is imperative that a subcontractor serve its
Notice of Claim of Lien on Funds as soon as possible.
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Are
lien rights available on public projects?
ANSWER:
Government
entities, both state and federal, are generally immune from
suit under the doctrine of sovereign immunity.
Thus, a party cannot claim a lien upon property
belonging to the government.
However, in light of this, most public projects require
that the general contractor provide payment bonds in order to
protect subcontractors=
rights to payment.
The ability to make claims under such bonds are
governed by both the language of the bond and by statute and
are strictly enforced.
Further, the ability and manner by which one goes about
making a claim against a bond and filing suit to enforce its
claim varies depending on whether the owner is the state or
the federal government.
Thus, it is suggested that one contact an attorney to
ensure that its rights under the bond are not lost.
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