North Dakota Debt Relief: Licensed Settlement Rules, Wage Limits, and Free Help

How North Dakota debt relief works

Search for help with bills in this state and you will see ads for "North Dakota relief programs" that promise to cut balances in half. None of them is run by the state. North Dakota does not buy, pay, or cancel credit card, medical, or personal loan debt for residents. What the state does is regulate the businesses that offer help, set limits on what creditors can take after a court judgment, and fund free legal aid for people with low incomes.

So real relief usually comes from one of four places. A nonprofit counselor can set up a repayment plan with lower interest. You or a licensed company can negotiate a payoff for less than the full balance. A bankruptcy court can discharge or reorganize debts. Or the state's own rules can stop or shrink a collection, for example when a debt is too old to sue on or when your pay is mostly protected.

Before you pay anyone, read our guide on how to tell if a debt relief company is legit. In North Dakota there is an extra test: ask for the company's state license, which every settlement firm serving residents must hold.

The state's debt settlement license and fee caps

North Dakota passed its own debt settlement law in 2011, and the Department of Financial Institutions (DFI) began licensing companies that August. Under NDCC chapter 13-11, it is unlawful to act as a debt settlement provider for a North Dakota resident without a state license. That applies even if the company is based in another state and only talks to you by phone.

What a licensed firm may charge

The fee rules in section 13-11-21 are some of the clearest in the country:

• No enrollment, setup, or monthly maintenance fees of any kind.
• No fee until a deal is done. A creditor must agree in a binding way to accept a set amount, and the money must actually be paid, before the firm can collect for that debt.
• A cap of 30% of the savings. If a $10,000 balance settles for $6,000, the savings are $4,000, so the most the firm can charge for that account is $1,200.
• No fee at all if the settlement is more than the original principal.

Other protections in the contract

The firm must give you written disclosures before you sign, including its fees and how much you are expected to save each month. You can cancel before it has finished the work, and the law sets out when fees and money in a settlement account must be refunded. A provider may not settle a debt for more than half of the principal unless you agree after the creditor has agreed. It also may not ask for "voluntary contributions" or sell you unrelated products.

To check a license, call DFI at 701-328-9933 or visit the Department of Financial Institutions website. Collection agencies are licensed by the same department under NDCC chapter 13-05, so DFI is also the place to ask whether a collector calling you is allowed to collect in the state.

Nonprofit counseling and repayment plans

If your income is steady and the problem is mainly high interest on cards, a debt management plan is often the gentlest fix. A nonprofit counselor reviews your budget for free, then asks your card issuers to lower rates and drop late fees. You send one payment a month to the agency, and it pays each creditor. Most plans run three to five years, and you pay the full balance rather than a reduced one, so your credit takes less of a hit than with settlement.

The National Foundation for Credit Counseling lists member agencies that work with North Dakotans by phone and online, which matters in a state where many towns are far from an office. Ask any agency what it charges each month, whether it is a nonprofit, and how it handles your money. Our debt management plan guide covers what the first few months look like.

If you are thinking about bankruptcy, federal law requires a short credit counseling course from an agency approved by the U.S. Trustee Program before you file. Many approved agencies offer it online for a small fee and waive it for people with low incomes.

Five routes side by side

Many people combine routes. A family in Minot might put two current cards on a counseling plan while defending a lawsuit on an old store card that is past the deadline.

Six years to sue, and what restarts the clock

Under NDCC 28-01-16, an action on a contract, obligation, or liability must generally be started within six years after the claim accrues. For most credit cards and loans, that is counted from the default or the last payment. Once the time has passed, you can raise it as a defense if you are sued.

Be careful about the next step. Section 28-01-36 says a promise or acknowledgment only extends the deadline if it is in writing and signed by you, but it also says the law does not change "the effect of any payment." In plain terms, a payment on an old account may restart the clock in North Dakota. Before you send money on a debt that is close to six years old, get advice from legal aid.

A court judgment lasts much longer. Section 28-01-15 gives ten years to bring an action on a judgment, so a debt that has already gone to judgment is not covered by the six-year rule.

Garnishment notices and the dependent credit

North Dakota gives two protections before a creditor touches your paycheck. First, under NDCC 32-09.1-04, the creditor must serve you a notice at least ten days before it issues a garnishee summons to your employer. If it skips that notice, the garnishment is void. Second, section 32-09.1-03 limits how much can be taken.

How the limit is figured

The most that can be withheld in a week is the lesser of:

• 25% of your disposable earnings (pay after required deductions such as taxes), or
• the amount by which weekly disposable earnings exceed 40 times the federal minimum wage. At $7.25 an hour, that floor is $290 a week.

Then the result is reduced by $20 a week for each dependent family member who lives with you. To get this credit, you give your employer a signed list of those dependents within ten days of receiving the garnishee summons. If you miss that window, you can still turn in the list later, and the credit applies from then on.

A worked example

Say a Bismarck worker brings home $600 a week and lives with two children. Twenty-five percent is $150. The amount above $290 is $310. The lower figure is $150, and after the $40 credit for two dependents, the most that can be garnished is $110 a week. A worker taking home $290 or less cannot be garnished at all for an ordinary consumer debt. These limits do not apply to child support, bankruptcy court orders, or tax debts, which follow their own rules.

If a garnishment makes it hard to pay for food, rent, or heat, the North Dakota hardship relief guide lists state and local help that can ease the squeeze while you sort out the debt.

Property North Dakota protects from creditors

Even after a creditor wins in court, North Dakota law shields certain property from being seized and sold. The main amounts come from NDCC 47-18-01 and NDCC chapter 28-22.

Chapter 28-22 also protects Social Security benefits and most retirement accounts that have been in place for at least a year, with limits. There is a catch: under section 28-22-06, you generally have to claim your exemptions within ten days after you are served with the levy papers. Read every notice the sheriff or court sends, and ask legal aid for help with the claim form if you are unsure.

Steps to take after a summons arrives

North Dakota consumer debt cases are usually filed in state district court. In this state a lawsuit can begin when the papers are served on you, sometimes before anything is filed with the court, so do not assume a case is not real because you cannot find it online. You generally have 21 days to answer; the summons will state the time.

1. Write down the deadline printed on the summons and plan to answer before it.
2. Check the dates. If the last payment was more than six years ago, the deadline may defeat the claim.
3. Ask who owns the debt. A debt buyer must be able to show it bought your account and how the balance was figured.
4. Call Legal Services of North Dakota or a private lawyer for advice, even if you plan to settle.
5. Settle in writing. If you agree to pay, get a signed agreement that says the case will be dismissed.

If you ignore the summons, the creditor can get a default judgment, and garnishment can follow after the ten-day notice described above.

Free legal aid and complaint offices

Legal Services of North Dakota takes calls Monday through Thursday and has income rules, so have your household income handy when you call. If debt sits on top of bigger needs such as rent or heating bills, see our list of North Dakota assistance programs.

Related guides

• Free legal aid for debt collection
• How debt settlement works
• Minnesota debt relief programs
• Montana debt relief programs

Frequently asked questions

This guide is general information, not legal or financial advice. Laws and amounts change, and how they apply depends on your facts; talk to Legal Services of North Dakota or a licensed North Dakota attorney about your situation. National Relief Program is an independent website, not a government agency.