Filing for bankruptcy can be a complex and difficult process, but it can also provide individuals and businesses with much-needed debt relief. If you are considering filing for bankruptcy in the state of North Carolina, it is important to understand the specific laws and regulations that apply to your situation.
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In this article, we will take a closer look at what you need to know about filing for bankruptcy in North Carolina. We will explore the different types of bankruptcy available, the exemptions that can protect your assets, and the process involved in filing for bankruptcy. By understanding the ins and outs of bankruptcy in North Carolina, you can make an informed decision about whether bankruptcy is the right choice for you.
Chapter 7 vs. Chapter 13 Bankruptcy in North Carolina
There are two types of bankruptcy that individuals can file in North Carolina: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is also known as “liquidation” bankruptcy because it involves selling nonexempt assets to pay off creditors. This type of bankruptcy is best suited for individuals who have little to no disposable income and few assets.
Chapter 13 bankruptcy, on the other hand, involves creating a repayment plan to pay off creditors over a period of three to five years. This type of bankruptcy is best suited for individuals who have a regular income and some assets that they wish to keep.
North Carolina Bankruptcy Exemptions
When filing for bankruptcy in North Carolina, individuals can use federal or state exemptions to protect their assets. Federal exemptions include things like a home, vehicle, and personal property, while state exemptions vary depending on the value of the asset.
In North Carolina, individuals can choose between two sets of exemptions: the federal bankruptcy exemptions or the North Carolina bankruptcy exemptions. The North Carolina exemptions include a homestead exemption of up to $35,000, a motor vehicle exemption of up to $3,500, and a wildcard exemption of up to $5,000.
Filing Bankruptcy in North Carolina: The Process
The first step in filing for bankruptcy in North Carolina is to complete credit counseling with an approved agency. This counseling will help individuals determine if bankruptcy is the right choice for their situation and provide them with information about the bankruptcy process.
Once credit counseling is complete, individuals must complete a bankruptcy petition and file it with the North Carolina bankruptcy court. Along with the petition, individuals must also provide a list of creditors, income, expenses, and any assets and liabilities.
After the petition is filed, a trustee will be appointed to oversee the case and ensure that all assets are properly distributed to creditors. The trustee will also hold a meeting of creditors, where creditors can ask questions about the debtor’s financial situation.
If individuals are filing for Chapter 7 bankruptcy, they will need to attend a means test hearing to determine if they qualify for this type of bankruptcy. This test compares their income to the median income in North Carolina for a household of the same size. If their income is below the median, they may qualify for Chapter 7 bankruptcy.
If individuals are filing for Chapter 13 bankruptcy, they will need to create a repayment plan that will be reviewed and approved by the trustee and the court. Once the plan is approved, individuals must make regular payments to the trustee over the course of three to five years.
The Pros and Cons of Filing for Bankruptcy in North Carolina
Filing for bankruptcy in North Carolina can be a difficult decision, and it is important to consider the potential pros and cons before making a decision. Here are some of the main pros and cons of filing for bankruptcy in North Carolina:
Pros:
- Debt Relief: One of the most significant benefits of filing for bankruptcy is that it can provide individuals with relief from their debt. Depending on the type of bankruptcy filed, individuals may be able to eliminate or reduce their debt, which can provide a fresh start and help them regain control of their finances.
- Protection from Creditors: Filing for bankruptcy also provides protection from creditors. Once a bankruptcy petition is filed, an automatic stay goes into effect, which prohibits creditors from taking any further collection actions against the individual. This can provide individuals with much-needed breathing room and stop harassing phone calls and letters.
- Exemptions: In North Carolina, individuals can use federal or state exemptions to protect their assets. These exemptions can allow individuals to keep certain assets, such as their home or car, even after filing for bankruptcy.
- Peace of Mind: Filing for bankruptcy can provide individuals with peace of mind, knowing that they are taking steps to address their debt and get back on track financially. This can help alleviate stress and anxiety related to debt.
Cons:
- Credit Score: One of the biggest downsides of filing for bankruptcy is the impact it can have on an individual’s credit score. Bankruptcy can stay on a credit report for up to ten years, and it can make it more difficult to obtain credit in the future.
- Embarrassment and Stigma: Filing for bankruptcy can also be embarrassing and carry a stigma. Some people may feel ashamed or embarrassed about their financial situation, and filing for bankruptcy requires disclosing personal financial information.
- Cost: Filing for bankruptcy can be expensive, especially if individuals choose to work with an attorney. There are also filing fees and other costs associated with the bankruptcy process.
- Potential Loss of Assets: Depending on the type of bankruptcy filed, individuals may be required to sell nonexempt assets to pay off creditors. This can result in the loss of personal property or other assets.
Filing bankruptcy in North Carolina can provide debt relief and protection from creditors, but it can also have a negative impact on credit score, carry a stigma, be expensive, and potentially result in the loss of assets. It is important to carefully consider the pros and cons and seek the advice of a qualified bankruptcy attorney before making any decisions about filing for bankruptcy.
Conclusion
Filing for bankruptcy in North Carolina can be a complex and confusing process, but it can also provide individuals with a much-needed fresh start. By understanding the types of bankruptcy available, the exemptions that are available, and the process involved in filing for bankruptcy, individuals can make an informed decision about whether bankruptcy is the right choice for their situation. It is important to seek the advice of a qualified bankruptcy attorney before making any decisions about filing for bankruptcy.
FAQs
What types of bankruptcy are available in North Carolina?
The two most common types of bankruptcy for individuals in North Carolina are Chapter 7 and Chapter 13 bankruptcies.
What is a Chapter 7 bankruptcy?
A Chapter 7 bankruptcy is also known as a “liquidation” bankruptcy because it discharges most unsecured debts, such as credit card debt, medical bills, and personal loans.
What is a Chapter 13 bankruptcy?
A Chapter 13 bankruptcy is a reorganization bankruptcy that allows you to keep your assets while paying off your debts over a period of three to five years.
How do I know if I qualify for bankruptcy in North Carolina?
To qualify for Chapter 7 bankruptcy in North Carolina, you must pass a means test, which evaluates your income and expenses to determine if you have enough disposable income to pay off your debts. To qualify for Chapter 13 bankruptcy, you must have a regular source of income and your debts must fall within certain limits.
Will I lose all my assets if I file for bankruptcy?
No, North Carolina allows you to protect certain assets from being seized during bankruptcy through exemptions. These exemptions include homestead, personal property, vehicles, retirement accounts, wages, and tools of the trade.
Can bankruptcy stop foreclosure or repossession?
Yes, filing for bankruptcy triggers an automatic stay that stops all collection actions against you, including foreclosure, repossession, wage garnishment, and lawsuits.
Will I lose my job if I file for bankruptcy?
No, filing for bankruptcy is protected by federal law, and it is illegal for an employer to discriminate against you based on your bankruptcy status.
How long does bankruptcy stay on my credit report?
Bankruptcy will remain on your credit report for up to ten years, which can impact your ability to get credit or loans in the future.
Can I file for bankruptcy without an attorney?
While it is possible to file for bankruptcy without an attorney, it’s not recommended. The bankruptcy process is complex, and mistakes can have serious consequences. It’s important to speak with a bankruptcy attorney who can guide you through the process and ensure that all required documentation is submitted correctly.
How do I find a bankruptcy attorney in North Carolina?
You can search for bankruptcy attorneys in North Carolina through the State Bar Association or by asking for referrals from friends, family, or other professionals. It’s important to choose an attorney with experience in bankruptcy law who you feel comfortable working with.
Glossary
- Bankruptcy – a legal process in which a person or business declares themselves unable to pay their debts and seeks relief from creditors
- Chapter 7 bankruptcy – a type of bankruptcy in which assets are sold to pay off debts, and remaining debts are discharged
- Chapter 13 bankruptcy – a type of bankruptcy in which a payment plan is created to repay debts over a period of three to five years
- Trustee – a court-appointed official who oversees the bankruptcy process and manages the sale of assets in a Chapter 7 bankruptcy
- Exempt property – a property that is protected from being sold to pay off debts in bankruptcy, such as a primary residence or personal belongings
- Non-exempt property – a property that may be sold to pay off debts in a bankruptcy, such as investment property or luxury items
- Means test – a calculation used to determine if a person qualifies for Chapter 7 bankruptcy based on their income and expenses
- Automatic stay – a court order that stops creditors from attempting to collect debts during the bankruptcy process
- Discharge – the release of a debtor from the legal obligation to pay certain debts
- Credit counseling – a requirement for all bankruptcy filers to attend a credit counseling session before filing for bankruptcy
- Debtor – a person or business that owes money to creditors
- Creditor – a person or business that is owed money by a debtor
- Secured debt – debt that is backed by collateral, such as a mortgage or car loan
- Unsecured debt – debt that is not backed by collateral, such as credit card debt or medical bills
- Reaffirmation agreement – an agreement between the debtor and creditor to continue paying a debt even after bankruptcy
- Adversary proceeding – a lawsuit filed in bankruptcy court by a creditor or trustee seeking to challenge the discharge of a debt
- Dismissal – a court order that terminates the bankruptcy process without discharging any debts
- Bankruptcy estate – all property owned by the debtor at the time of filing for bankruptcy, which may be sold to pay off debts
- Priority debt – debt that is given priority in the bankruptcy process, such as taxes or child support
- Unsecured priority debt – priority debt that is not backed by collateral, such as unpaid wages or alimony.
