Jan262026
Real Estate Q&A Series

What happens if the borrower stops making payments under a promissory note secured by a deed of trust? – North Carolina

Short Answer

In North Carolina, if the borrower stops making payments on a promissory note that is secured by a deed of trust, the lender (through the trustee named in the deed of trust) can usually declare a default, accelerate the debt (make the full balance due), and start a foreclosure under the deed of trust’s “power of sale.” The process typically begins with a filed notice and a hearing before the Clerk of Superior Court, followed by a public sale if the clerk authorizes foreclosure. Depending on the paperwork and who received notice, the borrower (and sometimes other obligated parties) may still have options to cure the default, negotiate, or contest whether the legal requirements were met.

Understanding the Problem

Under North Carolina real estate law, what happens after a borrower stops paying is mainly a question of whether the deed of trust gives the lender the right to foreclose and, if so, what steps must occur before the property can be sold. The key decision point is whether the lender (acting through the trustee) can prove a default under the promissory note and satisfy the required notice-and-hearing process before the Clerk of Superior Court. The outcome usually turns on timing, proper notice to the correct parties, and whether the debt is valid and enforceable under the loan documents.

Apply the Law

In North Carolina, most deeds of trust include a “power of sale,” which allows a non-judicial foreclosure process that runs through the Clerk of Superior Court in the county where the property is located. After a payment default, the lender often sends default and payoff information, may accelerate the loan if the documents allow it, and then the trustee (or substitute trustee) files a notice of hearing. At the hearing, the clerk does not decide every dispute about the loan; the clerk focuses on specific required findings, including that there is a valid debt, a default, a right to foreclose under the instrument, and proper notice to required parties.

Key Requirements

  • Valid debt and “holder” status: The party seeking foreclosure must show there is a real, enforceable debt and that it has the legal right to enforce it (often described as being the “holder” of the note).
  • Default and right to foreclose: The evidence must show a default (commonly missed payments) and that the deed of trust allows foreclosure (usually through a power of sale clause).
  • Proper notice and the clerk hearing: The trustee/lender must serve a notice of hearing on required parties and give enough lead time before the hearing; the hearing is held before the Clerk of Superior Court in the county where the land sits.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the issue involves a promissory note secured by a deed of trust, which usually means the lender’s main remedy for nonpayment is foreclosure of the real property collateral. If payments stop, the lender will typically claim a default under the note and rely on the deed of trust’s power of sale to ask the Clerk of Superior Court to authorize a foreclosure sale. Whether foreclosure can move forward depends on the lender’s ability to prove the required clerk findings (valid debt/holder status, default, right to foreclose, and proper notice) and compliance with the notice and hearing steps.

Process & Timing

  1. Who files: The trustee or substitute trustee (often acting at the lender’s direction). Where: The Clerk of Superior Court in the county where the property is located. What: A notice of hearing for a power-of-sale foreclosure. When: The notice of hearing must be served at least 10 days before the hearing date in typical cases.
  2. Clerk hearing: At the hearing, the clerk considers evidence and decides whether the statutory findings are met (including valid debt/holder status, default, right to foreclose, and notice). If the clerk authorizes the foreclosure, the trustee can move forward with scheduling and noticing the sale.
  3. Sale and after-sale steps: The trustee conducts a public sale under the deed of trust and statutory procedures, then records the required foreclosure documentation after the conveyance. If the sale is completed, possession issues can follow, and the purchaser may pursue lawful possession through the court process if needed.

Exceptions & Pitfalls

  • Notice problems can change liability: North Carolina’s foreclosure statute ties deficiency exposure to notice in some situations; for example, if a person obligated on the debt is not properly notified and the holder intends to pursue that person, that lack of notice can affect post-sale deficiency liability.
  • The trustee is not the borrower’s advocate: The trustee must follow the statute and the deed of trust and is expected to act as a neutral party in the foreclosure proceeding, which can surprise borrowers who assume the trustee will “work it out” informally.
  • Paperwork and “holder” issues: Disputes sometimes arise about whether the foreclosing party can prove it is the proper holder of the note and has the right to foreclose under the deed of trust. These issues often need to be raised promptly and supported with evidence.
  • Timing and local practice vary: Even with the same statute, scheduling and procedural details can vary by county, and missing a hearing date or appeal deadline can limit options.

For more background on how the documents work together, see the difference between a deed of trust and a promissory note.

Conclusion

In North Carolina, when a borrower stops paying a promissory note secured by a deed of trust, the lender can usually accelerate the debt and pursue a power-of-sale foreclosure through the Clerk of Superior Court. To proceed, the foreclosing party must prove a valid debt, a default, a right to foreclose under the deed of trust, and proper notice. A key timing issue is that the notice of hearing generally must be served at least 10 days before the hearing. Next step: file and serve the notice of hearing with the Clerk of Superior Court in the county where the property is located.

Talk to a Real Estate Attorney

If there is a missed-payment default on a promissory note secured by a deed of trust and foreclosure is being threatened or started, our firm has experienced attorneys who can help explain the process, review the documents and notices, and outline practical options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Real Estate Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.