Chapter 7 Vs Chapter 1: Which Should I File
When it comes to filing for bankruptcy, there are generally two options to choose amongst – Chapter 13 bankruptcy is a reorganization whereas Chapter 7 bankruptcy is a liquidation. Choosing which one is right for you depends on your income level and what assets or property you hope to keep. Chapter 13 bankruptcy is generally used by debtors who want to keep secured assets, such as a home or car. In the bankruptcy filing, debtors do not have to lose their secured assets. A chapter 13 bankruptcy allows the debtor to make a repayment plan, making up their overdue payments over the course of 3-5 years and reinstating the original agreement. Also, a debtor may be able to keep valuable nonexempt property with Chapter 13.
However, for the vast majority of individuals who simply want to eliminate their heavy debt burden without paying any of it back, Chapter 7 provides the most attractive choice. This chapter erases things like credit card debt, medical bills, and most civil judgments, though it is not guaranteed that you will be able to keep your expensive property.
How To File For Chapter 7 Bankruptcy
You can choose to file for Chapter 7 bankruptcy on your own or hire an attorney to help. Some legal aid centers and nonprofit credit counseling agencies may also be able to offer you free assistance. Once you determine that you’re eligible, the process will be largely the same:
How Does Bankruptcy Work
Both businesses and individuals have the right to file for bankruptcy, and there are a few different options within the umbrella of protection. According to Debt.org, In 2020, bankruptcy filers owed $86 billion and had assets of $56 billion. Most of those assets were real estate holdings, whose value is debatable.
Essentially what happens when you file for bankruptcy in the courts puts a hold on all your debts, and creditors cannot continue attempting to collect on them until the matter is resolved.
A court-appointed representative works with the person in debt and evaluates their income and liabilities to determine if bankruptcy is feasible and how to proceed.
The court may discharge the debts . Or the court may decide that the person does have the means to pay off their debt and may assist in working out a payment plan.
The process includes compiling and reviewing your financial records. The court also requires that you seek the help of a credit counselor before filing for bankruptcy. You must use an approved credit counseling agency when taking this step. Then if you have exhausted all other avenues of financial help, you can file a petition for bankruptcy with the court. Once the courts have accepted your bankruptcy, your court-appointed trustee will set up meetings between you and your creditors to work out the terms of repayment and allow the creditors to ask questions. The creditors may or may not attend, but you are required by law to be there.
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How Does Declaring Bankruptcy Work
I asked Howard Dvorkin, chairman and CEO of Debt.com, to help me figure it out. He told me that bankruptcy is a way for people to get rid of their debt and start fresh when all else fails. Thats how the Supreme Court described it in a 1934 opinion, saying bankruptcy gives the honest but unfortunate debtor an opportunity to thrive unhampered by the pressure and discouragement of pre-existing debt.
Declaring bankruptcy isnt super common. In 2020, only about 523,000 people did so the lowest number of filings since 1986, and down from 752,000 the year before.
There are two primary types of personal bankruptcy: Chapter 7 and Chapter 13. Dvorkin says Chapter 7 is what most people think of when they imagine bankruptcy, where the court sells some of my assets to pay off my debts. Chapter 13, on the other hand, is more of a reorganization where I repay some of what I owe through a court-ordered plan.
Chapter 7 is largely for low-income people. Its fast, taking about 120 days compared to Chapter 13, which can take up to five years.
Both types get rid of unsecured debt, which includes credit card debt and medical bills but usually not student loans or back taxes, according to Sheereen Middleton, a bankruptcy attorney in Maryland. Bankruptcy can be a strategic move to eliminate that debt, which would then leave you with a favorable debt-to-income ratio, she adds.
Its something where it can literally change your life, Middleton says.
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Our team works hard to create satisfied clients and help you get the fresh financial start you need. Learn more by reading additional client testimonials on our reviews page.
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What Is Chapter 7 Business Bankruptcy
Chapter 7 business bankruptcy is designed for businesses that cannot repay their debts because they can no longer maintain operations and earn revenue. The company shuts down so the court-appointed trustee can liquidate its assets and repay the creditors. All directors and employees are dismissed.
The liquidation process is pretty simple. Most Chapter 7 filers owe debts to multiple creditors. Thus, the trustee divides the businesss assets to compensate each creditor for the amount owed. Thanks to federal and state bankruptcy exemption laws, creditors cannot seize certain types of personal assets. For example, you probably wont have to give up full ownership of your home or vehicle under Chapter 7 bankruptcy.
Though all business entities can legally file Chapter 7, most filers are reportedly sole proprietors. This is because only sole proprietors are eligible to receive whats known as a debt discharge after filing Chapter 7. If you are discharged from a business debt, you will no longer be responsible for paying it back, even if the original agreement included a personal guarantee. Thus, the creditor cannot seize your personal assets.
Discharges are not available to corporations, LLCs, and partnerships. When owners of these business entities sign a personal guarantee on a loan, filing for Chapter 7 wont protect them from having their personal assets seized if they cant pay off the debt.
Contact A Nc Bankruptcy Attorney Today
Bankruptcy is not right for everyone, and some types of debts cannot be erased through bankruptcy. But if you have accumulated an overwhelming amount of debt or a creditor has threatened to take legal action, then you may need to talk with a bankruptcy lawyer about seeking legal protection to prevent the seizure of assets.
A North Carolina bankruptcy attorney at Sasser Law will help you analyze your options and discuss your options. We understand that you are feeling stress if you are contemplating bankruptcy or are being pursued by debt collectors. Our attorneys will be both understanding and honest about what steps you need to take. Since the year 2000, we have filed more than 8,500 cases for clients in Raleigh, Cary, Durham and communities throughout the Triangle.
We want what is best for each client and are ready to help you make a fresh start.
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Types Of Cases We Handle
When applying for Chapter 7 bankruptcy, there are many elements of the process that you must understand before you can move forward. Although you may be able to learn about this process on your own, it is unlikely that you will be able to find reliable information to answer all of your questions. For this reason, our attorneys are prepared to work with you throughout the filing process to provide all of information and guidance you may need. Some of the most important information we are able to provide includes:
These are just a few of the many different important pieces of information you must know before filing for bankruptcy. With the answer to these questions and more, you will be more prepared to file your claim and more likely to receive a favorable outcome. In order to answer these concerns and any others, you will have to contact our office for a free consultation.
Can Bankruptcy Affect My Cpa Status
Although bankruptcy is a last resort, it can provide relief from creditor calls and letters when you find there is simply no other way to manage your debt. Bankruptcy stays on your credit report for up to 10 years, and can affect your ability to take out a car loan, get a home mortgage and obtain credit cards. If you are a certified public accountant, you may worry that filing bankruptcy may also affect your professional status. However, filing bankruptcy does not affect your CPA license.
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How Does Business Bankruptcy Affect Credit
Compared to other business entities, sole proprietors will take the biggest hit to their personal credit after filing for bankruptcy. Unlike registered entities like LLCs and corporations, sole proprietors have no legal distinction between personal and business debts. After all, you cant expect to have your debts discharged without paying some price. Sole proprietors should expect to see their scores go down by at least 120 points, and the bankruptcy will stay on their credit report for at least seven years.
Owners of registered business entities are not personally responsible for business debts. Hence, their personal credit scores may take little if any damage from bankruptcies. The unpaid debts and bankruptcy also wont show up on their personal credit reports. They will, however, show up on your business credit report. Individual financial institutions might review your business credit before approving financing. Vendors and suppliers will look at your business credit score before deciding to work with you as well.
But, there is one condition in which business debts can affect registered business entities personal credit scores.
Before Filing A Bankruptcy Petition
Though bankruptcy filings are sometimes the best way to resolve debts, they are not the only alternative. Before deciding if you should file for bankruptcy, consider steps to resolve your debt. Then speak with an attorney to determine if bankruptcy is right for you. Each of these alternatives has its own set of pros and cons and only an attorney can advise you as to the best course of action in your particular case.
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How Long Does It Take To File For Business Bankruptcy
The length of the entire bankruptcy process depends on the type. A sole proprietor who files Chapter 7 will likely be wholly discharged from their debts within four to six months. Chapter 13 is mostly filed by sole proprietors as well. For this reason, it usually doesnt take more than six months to develop a reorganization plan and get it approved by a few creditors and the bankruptcy court. Depending on the plans terms, however, it could take anywhere from three to ten years for the filer to repay all of their debts.
Chapter 11 takes significantly more time than Chapter 13 since it usually involves larger businesses with many creditors. The more creditors you have and the more money you owe, the longer it takes for creditors to approve your reorganization plan.
During the court proceedings, creditors often question the filer about their reorganization plan and take several months to approve it. It could take well over a year for each creditor and the bankruptcy to approve the plan. This lengthy process will also result in outrageous legal fees.
Feb How Does Redemption Work In Chapter 7
What are your options in Chapter 7 if you own a vehicle that is worth thousands of dollars less than the debt on the vehicle in other words, you are upside down on the vehicle. Further, what if you are behind on your payments or you have a spotty payment history?
The Bankruptcy Code provides two options for a debtor who wants to keep secured collateral that is subject to an outside loan. Option one is called reaffirmation and I discussed that process in a previous Bankruptcy Law Network blog post. Option two is called redemption and Ill discuss it here.
Section 722 of the Bankruptcy Code provides that a debtor can redeem secured collateral for an amount equal to the secured portion of the loan. In other words, if you have a vehicle worth $7,500 subject to a $17,000 loan, the secured portion of the loan is $7,500 and the unsecured portion is $9,500. You can therefore redeem the vehicle for $7,500.
In order to redeem you and your lawyer have to file a Motion for Redemption of Collateral and you must be prepared to buy out the secured lender immediately.
Not surprisingly, there are several lending sources that have arisen to provide financing to debtors seeking to redeem collateral. You and your lawyer should carefully examine the finance terms of redemption loans. In some cases, you can save money but in other cases, the cost of a redemption loan might cancel out the savings you might see from a standard reaffirmation.
by Jonathan Ginsberg, Atlanta bankruptcy lawyer
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The Outcome Depends On The Type
The bankruptcy outcome also depends on the type of bankruptcy: Chapter 7, Chapter 11, or Chapter 13. Each type offers its pros and cons, so this decision must be made very carefully. Additional factors include the time and costs associated with specific processes.
In this guide, well explain how small businesses file for bankruptcy, along with the risks and potential rewards of each type.
In this guide, well answer the following questions and more:
What Is Chapter 7 Bankruptcy
Chapter 7 bankruptcy, also known as a straight or liquidation bankruptcy, is a type of bankruptcy that can clear away many types of unsecured debts. If you’re far behind on your bills and don’t have the means to afford monthly payments and living expenses, filing Chapter 7 bankruptcy could be a last resort to help you reset your finances. However, you may have to give up some of your possessions, and it will have a long-lasting negative impact on your creditworthiness.
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Im Ready For My Fresh Financial Start How Do I Get Started
You can contact a member of the Duncan Law bankruptcy team right now. When you contact our office in Charlotte, NC for your free initial consultation, we will set up an appointment for you to meet with Terry Duncan to discuss your situation. There are two easy ways to contact our office: you can call us at 704-563-1224 or submit a contact form and receive a quick response from a member of the Duncan Law team. We are located at 4801 E. Independence Blvd., #1100 in Charlotte, NC 28212.
How Do I Find My Case Number In North Carolina
A case number is an identification number assigned to a legal proceeding once filed in court. It helps to distinguish a case from others and has some unique features. A case number typically reveals the filing judicial officer’s identity, the year it was filed, and the office that registered it. Individuals who wish to find their case numbers in North Carolina must do so by visiting the office of the clerk of the Superior Court in the county where such cases were filed. Information such as the names of parties involved in the case, case type, filing judicial officer, filing date start, and filing date end will help facilitate a quick search. However, a nominal search fee may apply, and interested persons must be willing to pay.
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