When You Might Not Need To File For Bankruptcy
If You’re Judgment Proof
It youre truly broke, you may be what the law calls judgment proof. This simply means that creditors cant grab your property or your salary because theres nothing the law allows them to take.
You can check the exemption laws for North Carolina to learn what property your states law protects. But keep in mind that exemption laws dont shield property from all types of debts or all types of creditors. For instance, exemption laws typically wont protect your property if you owe child support or back taxes. And if you bought property and pledged it as collateralcommon for car loans and mortgagesthe lender can take the property regardless of any exemption law.
If youre judgment proof, instead of filing for bankruptcy, your best option may be to ride out the hard times and do nothing for now.
If Your Creditors Are Willing to Negotiate Payment Plans or Settle Your Debts
Your creditors may be willing to set up reasonable payment plans or even to settle your debts for less than you owe. For obvious reasons, this can be a stressful processbut you may be able to get help from a nonprofit credit counselor or debt management agency. You can find a list of qualified agencies on the website of the United States Department of Justice.
If Bankruptcy Can’t Cancel Your Debts
If It’s Just Not the Right Time
The vast majority of people who end up filing for bankruptcy really do need it.
Collect Your North Carolina Bankruptcy Documents
It’s helpful to collect your supporting documents before you start completing your bankruptcy forms. That way, when you are ready to start completing the bankruptcy forms needed to file Chapter 7 bankruptcy in North Carolina, you don’t have to keep looking for more information. The documents you will needcan be categorized as income documents and documents related to your debts . If you plan on closing a bank account before filing bankruptcy in North Carolina, it’s a good idea to get a copy of your bank statements for the last 6 months or so beforehand. This way, if you end up needing to access the bank statements, you will have them already and can avoid the often times consuming and sometimes expensive process of getting statements for a bank account that has been closed. Your North Carolina bankruptcy will go much more smoothly if you start organized in collecting your documents.
Filing Bankruptcy Alone Vs Filing With An Attorney
Current laws do not require filers to hire a lawyer to declare bankruptcy relief. People are permitted to represent him or herself as a pro se debtor. You will simply contact the local bankruptcy court and obtain all forms and requirements directly through them. Going it alone is not for the faint of heart.
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Protecting Your Exempt Property
If you file for Chapter 7 bankruptcy, the bankruptcy trustee assigned to your case may sell your property to pay your debts unless the law specifically allows you to keep all or a part of it. The property youre allowed to keep is called your exempt property. For example, exemptions may allow you to keep at least some of the equity in your home, a car, and personal property such as your clothes and household goods.
Bankruptcy exemptions arent automatic. You must figure out what is exempt and list that property on your bankruptcy forms, along with the specific laws that allow you to claim the property as exempt. Exemptions are determined by state law some states have their own exemptions, while others allow you to use the exemptions provided by the federal bankruptcy code.
For more information on North Carolina law, see the Exemptions section of this website.
Who Can File For Chapter 7 Bankruptcy
Chapter 7 bankruptcy is available to both individuals and business that are struggling under significant debt. The greatest tool to determine your eligibility is the means test, which examines your financial standing to determine if you meet the appropriate criteria for this form of bankruptcy. Although many people are eligible for Chapter 7 bankruptcy, you may be denied if:
- Your income is too high compared to the stateâs median income
- You can repay some portion of your debt with the disposable income you have
- You filed for Chapter 7 bankruptcy within the last eight years or Chapter 13 bankruptcy within the last six
- You failed to meet the credit counseling requirements
Even if you are ineligible for Chapter 7 bankruptcy, there are many options which may still be available to you, such as Chapter 11, 12, or 13 bankruptcy. Speaking with a bankruptcy attorney is the best way to understand your eligibility and how you should proceed.
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Whats The Difference Between Chapter 7 And Chapter 13 Bankruptcy
The major difference is time Chapter 7 takes 4-6 months Chapter 13 takes 3-5 years and money. You can have most, or all your unsecured debt discharged in Chapter 7 bankruptcy. In Chapter 13, some of your debt is forgiven, but only if you meet the conditions approved by the trustee and bankruptcy judge.
Making The Decision: Should You File For Bankruptcy
Bankruptcy Self-Help Resources
For about $30, you can purchase one of Nolo’s books: How to File for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy: Keep Your Property & Repay Debts Over Time. Either book will walk you through a self-analysis of your situation and explain your options in plain English. These books offer step-by-step discussions of Chapter 7 and Chapter 13 bankruptcy, including exempt property, keeping your home, and how to prepare and file your bankruptcy forms. They also alert you to situations that are particularly troublesome and should not be handled without an attorney.
This website supplements the information in Nolos bankruptcy books by providing quick access to bankruptcy services and information for your county.
Getting Professional Help
If you just need help with preparing the forms, you can hire a bankruptcy petition preparer. If you want legal advice and analysis of the details of your specific situation, you can hire a North Carolina bankruptcy lawyer to advise you. You’ll find listings in the Lawyers section of this site. These listings are not endorsements. They are simply designed to help you quickly connect with service providers in your area.
Whether you decide to do it yourself or hire professional help, our goal is to help you become a smarter, better-informed legal consumer and help you steer clear of shoddy services.
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Other Information From The Court
Most courts link to a downloadable U.S. Courts publication called “Bankruptcy Basics.” This offers a decent overview of Chapter 7 and Chapter 13 bankruptcy — but has no information about how to actually file or fill in the mountain of forms.
This term refers to “Case Management/Electronic Case Filing.”
This an “electronic filing” procedure that only applies to attorneys.
If you are filing for bankruptcy without an attorney , you can safely ignore all the warnings about “mandatory CM/ECF” — you are not required to file electronically.
If you are an attorney, don’t worry. This procedure is not as complicated as it sounds. In most districts, it basically means that the forms must be saved as PDF files and submitted in a specified manner.
Undoing Preferential Transfers That You Made Before Filing
One tool the trustee has is the authority to undo what are called “preferential transfers” — that is, money you transferred to someone else just before filing bankruptcy.
Under this power, the trustee will be very interested in undoing any recent repayments of debts you made to your relatives or friends just before bankruptcy, as these are called a “preference.” The trustee can reverse these transactions and reclaim it for the “bankruptcy estate” because, by repaying these people, you have “preferred” some people you owe money to over others — and bankruptcy does not allow this.
File For Bankruptcy Protection As Soon As Possible
In North Carolina, creditors have a limited time to file a debt collection lawsuit against you. In most cases, the designated time is generally three years from the date of the last payment you made, per G.S. § 1-52. After the allotted time has passed, your creditors can still pursue payment using alternative debt collection methods.
They can no longer file a lawsuit against you for repayment or garnish your paycheck to recoup the money you owe, but they can still impact your credit score and other financial prospects. Our legal team can help you understand how the debt collection statute of limitations applies to your case and how filing for bankruptcy can pause or stop debt collection activities until you can determine the best strategy that can help you regain control of your finances.
The Benefits Of Chapter 7 Bankruptcy
Filing Chapter 7 bankruptcy can mean your debts are fully discharged, and you no longer have an obligation to repay your creditors. In most cases, you can file Chapter 7 bankruptcy and still keep all of your assets, including your home and vehicle.
Our lawyer can help you navigate the following steps for filing Chapter 7 bankruptcy:
- Calculating your total debt load
- Creating a comprehensive list of your creditors
- Clearly establishing your income-to-debt ratio
These financial considerations play an important role in having your debt dismissed. When you are ready to eliminate your debt with a straightforward bankruptcy filing, we will explain the benefits of Chapter 7 bankruptcy and help you compile the required documentation so that you can file a timely, accurate claim.
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Figuring Out If Youre Eligible For Chapter 13
You may qualify for Chapter 13 bankruptcy if you have a steady income and your debts are worth less than the dollar amounts set by federal bankruptcy law. In 2019, the amounts are:
- $1,257,850 of secured debt.
These amounts are adjusted every few years and set out in 11 U.S. Code, Section 109.
In addition, to qualify for Chapter 13, you must have filed your state and federal income tax returns for the past four years.
Alternatives To Filing Chapter 7 Bankruptcy
If you are wondering if you should file for bankruptcy, there are many nonprofit consumer credit counseling organizations that have the ability to negotiate more favorable terms with creditors. Its particularly effective with credit-card companies. The repayment program will be managed expertly and fees could be avoided.
Here are some options:
Debt Management Plan Entering into a debt management program can provide relief from interest rates, late fees and penalties from creditors. Under a DMP, which is negotiated by credit counselors, you promise to pay back the full principal over time in an efficiently managed manner.
The debt management program provides an organized monthly payment plan. It provides an opportunity to handle the debt more efficiently than trying to sort it out yourself. By keeping the payments on track, it will be good for your credit score.
Some caveats: There is generally an enrollment and maintenance fee and the DMP is never a guaranteed option. Creditors have no obligation to participate.
Debt Consolidation This option reduces interest rates and combines all of your debts into one manageable monthly payment. Under debt consolidation, you take out a loan, which is used to consolidate and pay off all of your other debts.
Personal Loan for Bad Credit Yes, you can get a personal loan with bad credit, depending on your situation. You can expect high interest rates and should only consider this option if you can truly afford the monthly payment.
How Much Does It Cost To File For Bankruptcy In North Carolina
In 2021, Chapter 7 bankruptcy costs $338 in filing fees, unless you get a fee waiver from the court. And the filing fees for Chapter 13 are $313. But the cost of filing for bankruptcy is more than just the filing fee. You may also have to pay for:
When all is said and done, your bankruptcy case could cost you as much as $2,500 and as little as nothing at all. The total cost will depend on:
- whether you qualify for fee waivers
- whether you qualify for free legal aid services
- whether you handle the form preparation and filing yourself or pay someone to help you, and
- how complicated your financial situation isfor example, whether you’re facing imminent foreclosure, whether your debts involve child support or back taxes, and whether you have valuable assets that are not fully protected by an exemption.
Heres an overview of some of the costs that may come up during bankruptcy.
How Much Does It Cost To File Chapter 7 Bankruptcy
As counterintuitive as it may sound, it does cost money to file for Chapter 7 bankruptcy. The costs can vary depending on your case and the city or town you file in when it comes to attorney fees, but there are a few costs associated with filing that are uniform across the country. On top of attorney fees, as of December 1, 2016, you must pay a filing fee of $335 dollars for Chapter 7. Additionally, you are also required to get credit counseling from an approved provider at least six months before filing and enroll in a debtor education course after filing to receive any bankruptcy discharges. While some credit counselors donât charge anything, most cost between $15 and $30, and the debtor education courses cost around $35. If you are unable to pay for the credit counseling or debtor education courses, let the agency know or ask the providers if they can waive the fee.
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How Are Trustees Paid
Bankruptcy Code § 326 says that a trustees compensation is based upon a percentage of the property of the estate that is administered by the trustee. As a result, there is a financial incentive for a trustee to maximize the property of the estate. Consequently, discussions or disputes with a Chapter 7 trustee will mostly focus on what is property of the estate.
What Is A Bankruptcy Means Test
The objective of the Bankruptcy Means Test is to determine who is eligible to apply for debt forgiveness through a Chapter 7 Bankruptcy. It takes into account your:
- income and expenses
- household size and composition
- debt-to-income ratio
For those who do not qualify for a Chapter 7 filing, they will be able to file for Chapter 13, as described above.
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Which Type Of Bankruptcy Is Available To You
A mathematical formulacalled the means testestablishes the kind of bankruptcy you qualify for. of the bankruptcy code.) The means test considers:
- how your monthly income compares to the North Carolina median income
- the amount and types of your debts, and
- other aspects of your financial situation.
If your annual income is less than the North Carolina median income for your household size, then you can choose whether to file for Chapter 7 or Chapter 13, assuming you meet other qualifications. On the other hand, if your income is higher than the state median, you must first calculate your expense deductions to estimate your disposable income for the next five years. The result of this calculation determines whether you can file for Chapter 7 bankruptcy or are left with Chapter 13 as your only option.
Which One Should I Choose
Chapter 7 is, by far, the more popular form because its cheaper, quicker and effective at relieving responsibility for debt if you qualify! And thats a big if. You must pass a means test, meaning your disposable income is under the median income in your state. If you dont qualify for Chapter 7, you can always fall back on Chapter 13.
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How The Automatic Stay Stops Debt Collectors
After you file your bankruptcy petition with the court, an order called the “automatic stay” immediately stops most collection actions and civil lawsuits against you. The bankruptcy clerk notifies your creditors and, while the stay is in effect, they generally can’t call you, garnish your wages, repossess your property, or sue you.
That said, the automatic stay won’t stop certain legal actions against you, including:
- collection of child support or alimony
- repayment of loans from most retirement funds
- any criminal proceedings against you
- certain tax proceedings, or
- other actions or collections described in the U.S. bankruptcy code ).
In addition, the protection of the automatic stay may be shortened or denied altogether if you’ve filed for bankruptcy multiple times.
Child Support And Spousal Support
Its important to remember that bankruptcy wont stop actions for child support or spousal support. However, if the separated or ex-spouse is trying to collect against property thats part of the bankruptcy estate, they may need to seek legal relief against the automatic stay. You may hear the court refer to child support or alimony as domestic support obligations, or DSOs.
Info On Filing Without An Attorney
Information specific to your district
You’ll need information specifically about your particular court’s procedures.
Fortunately, the North Carolina Eastern District Bankruptcy Court offers information specifically designed for people filing without an attorney. Virtually all courts link to the generic national information mentioned above. The North Carolina Eastern District Bankruptcy Court offers specific guidance about local procedures.
General information about how to file
If you’re new to the bankruptcy process, the website of the US Courts Adminstrative Office now offers a basic orentation page for those filing bankruptcy without an attorney. The information inlcudes a Bankruptcy Basics video in EnglishSpanish and Creole. The half hour video is split into chapters so you can go back and review parts that went by too fast the first time.