When Is Filing Bankruptcy a Good Option?
Dec. 13, 2022
When overwhelmed with debts or going through financial difficulties, filing for bankruptcy is among the promising solutions to achieve debt relief. However, it is important to evaluate your current financial situation and understand your available bankruptcy options to be certain that you're making the right decisions. A knowledgeable North Carolina bankruptcy attorney can help you understand when filing bankruptcy may be a good option for you.
At Cannon Law Offices, PLLC, our attorneys have devoted their careers to advising and guiding clients through the complex procedures involved in bankruptcy filings. Our knowledgeable legal team can assess your financial condition and explore your available bankruptcy options. We can offer you the reliable advocacy and detailed guidance you need so that you can make informed decisions in your case. Our firm proudly serves clients across Greenville and throughout eastern North Carolina, including the Outer Banks, Wilmington, Hyde County, and Washington County.
Evaluate Your Current Financial Situation
Before you decide on filing bankruptcy, it is important for you to evaluate your current financial condition. Here are some vital factors to take into consideration:
How Much Debt You Have
When overwhelmed with debts, consider the amount of money you owe. If your debt load is more than 40% of your annual income, repaying those debts may be quite difficult. You will find it challenging to keep up with your monthly payments. Therefore, you may need to consider the various debt-relief options that may be available to you, including bankruptcy.
Money Coming In vs. What Is Owed
Conversely, if your debt load isn't really much, a simple lifestyle change can help correct your financial situation. Compare your debts with your income. If you make a decent income, but you're unable to account for your expenses, you may need to spend less and save more. These simple lifestyle changes may be exactly what you need to put aside more disposable income to offset your debts.
Are Debt Collectors Calling?
However, it can be very infuriating to deal with endless phone calls, emails, texts, and demand letters from creditors and debt collectors. When you file your bankruptcy petition, it will activate an "automatic stay" order. This is a federal court injunction that instructs debt collectors to stop contacting you and stop all collection efforts and ongoing legal actions.
What Bankruptcy Chapter Are You Eligible for?
In addition, your current financial condition will determine the right option of bankruptcy for you. If you are earning a reasonable income, you may consider paying off your debts through a Chapter 13 repayment plan. In contrast, if the majority of your debts are mostly unsecured debts, you may be able to eliminate them and achieve a financial clean slate through Chapter 7.
Understand Your Bankruptcy Options
Furthermore, Chapter 7 and Chapter 13 are among the most common bankruptcy options for consumers experiencing financial hardship in North Carolina.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is designed to individuals get a clean financial slate. It is to eliminate general unsecured debts, such as credit card bills, medical bills, and personal bills. Chapter 7 case, the North Carolina court will appoint a trustee to oversee your case. The trustee will gather and sell your non-exempt assets, then settle your creditors using the net proceeds from the sale.
Non-exempt assets are assets and property which a trustee can sell in a Chapter 7 case. These include your vacation homes, second homes, bank accounts, second vehicles, cash, family heirlooms, bonds, stocks, and other investments. However, you will be allowed to keep your exempt assets, such as your primary car, home, furniture pieces, clothing, and household appliances.
Chapter 13 Bankruptcy
An alternative for individuals who are overcome with debts but still make a decent income is through Chapter 13 bankruptcy. In a Chapter 13 case, the consumer will propose a structured repayment plan to offset both unsecured and secured debts with their future earnings while keeping their car, home, and other assets.
What's more, the repayment plan will be spread over three to five years. Through Chapter 13, you will be given enough time to pay back part or all of the outstanding debts using your future income. However, Chapter 13 is only available to regular income earners who have a significant debt burden.
Regardless of the bankruptcy chapter you are filing for, you are required to complete mandatory credit counseling from an approved agency in North Carolina within 180 days prior to filing.
Which Debts Won't Be Forgiven?
However, bankruptcy doesn't eliminate all kinds of debts. Some debts that won't be forgiven in a bankruptcy case include:
Alimony or spousal support
Divorce settlement debts
Fines and penalties
Whether you're filing for Chapter 13 or Chapter 7 bankruptcy, you're still obligated to repay any of the aforementioned debts.
Identifying Which Assets Could Be Affected
Furthermore, filing for bankruptcy in North Carolina won't leave you destitute. Though, some of your major assets and property might be affected. Here's how bankruptcy affects your assets:
Your Home – Once some of your debts have been forgiven in the bankruptcy case, paying your home loan or mortgage will become easier. Thus, you can keep your home after filing your bankruptcy petition.
Your Vehicle – What happens to your vehicle when you file for bankruptcy often depends on North Carolina's property exemption laws and other surrounding circumstances. Generally, your primary car is an exempt asset. You will be allowed to keep the vehicle in your bankruptcy case. Conversely, if you secured a loan using the vehicle as collateral, the creditor may file a court order to lift the automatic stay and repossess or foreclose your vehicle.
Your Pension – For the most part, your ERISA-qualified retirement accounts, pension plans, and life insurance policies are protected in the bankruptcy case. Therefore, creditors won't be able to access your nest egg when you file for bankruptcy.
Turn to Cannon Law Offices, PLLC
Filing for bankruptcy in North Carolina often involves several complicated procedures and thoughtful consideration. At Cannon Law Offices, PLLC, our attorneys have the diligence, expertise, and resources to advise and guide clients in bankruptcy-related matters.
As your legal counsel, we can assess your unique financial situation, determine your eligibility, and help you decide the ideal bankruptcy chapter that best fits your needs. In addition, we will help complete your forms, file your bankruptcy petition, and represent you in every phase of the legal process.
Are you considering filing for bankruptcy? Contact us at Cannon Law Offices, PLLC, today to schedule a simple consultation with trusted bankruptcy attorneys. We're proud to serve clients across Greenville and throughout eastern North Carolina, including Wilmington, the Outer Banks, Hyde County, and Washington County.