CHAPTER 13 BANKRUPTCY ATTORNEY IN GREENVILLE, NORTH CAROLINA

In 2020, 8,909 individuals sought protection under the bankruptcy code in North Carolina. More than half of them (4,657) chose to file under Chapter 13 of the code. Chapter 13 allowed these filers to reorganize their debts and propose a three- to five-year repayment plan after which they will be discharged from bankruptcy and largely debt-free, except perhaps for mortgage or car payments.

The bankruptcy code exists to give people who are overwhelmed by debt obligations a means for a fresh start in life. If you still have a regular income, Chapter 13 may be your best option since it can lower your total obligations while setting up one consolidated monthly payment that fits your budget.

Cannon Law Offices, PLLC has helped people in financial trouble achieve debt relief through the proper use of bankruptcy for many years. We stand ready to help you through every step of the bankruptcy process. Call Cannon Law Offices, PLLC today if you’re located in or around Greenville, North Carolina, or anywhere throughout eastern North Carolina, including the Outer Banks, Wilmington, Hyde County, and Washington County.

WHO QUALIFIES FOR CHAPTER 13?

A Chapter 13 bankruptcy is known as the “wage earner’s option.” When filing for Chapter 13, you can generally keep all of your property and possessions, but you must use all of your disposable income over a three- to five-year period to pay off your creditors.

The repayment duration is determined by your income. If your income falls below your state’s median income for a household of your size, you are able to use the three-year option. If it falls above the median income, you must use the five-year option.

During your loan repayment period, you must either pay your creditors all of your disposable income or at least the equivalent of the value of your non-exempt assets that would be sold during a Chapter 7 liquidation filing.

Disposable income is computed on the basis of “reasonable” expenses in your area for housing, utilities, food, transportation, and the like. If you’re used to dining out three times a week, you probably won’t experience that again until you’ve paid out all your disposable income and/or satisfied your creditors to the extent a liquidation of your assets would.

In other words, you’ll probably have to live a pretty frugal lifestyle for three to five years, but eliminating all of your unsecured debts without losing any assets makes it all worthwhile.

Chapter 13 also places a limit on your overall debt. Unsecured loans cannot exceed $394,725, and secured loans cannot exceed $1,184,200. These figures are adjusted periodically to account for inflation and other factors. Individuals and sole proprietorships can qualify for Chapter 13, but not partnerships or corporations, so it truly is a wage earner’s bankruptcy option.

WHAT DOES CHAPTER 13 DO?

The beautiful thing about Chapter 13 is that, even if you’re in arrears in your payments for your home and car, you can include the arrears amounts in your repayment plan so that you don’t have to come up with a lump sum to retain your ownership interest. Of course, while you’re paying off the Chapter 13 consolidated loan, you still have to make full payments on your home and vehicle.

All unsecured debts and arrears amounts will be consolidated into one repayment plan with one monthly payment. A trustee will deal with your creditors for you. However, before your repayment plan can take effect, the bankruptcy court will hold a meeting of creditors which you must attend to either approve or disapprove of your plan. If they disapprove, you may have to modify the plan or consider Chapter 7.

Determining disposable income and consolidating your loans can get complicated, so you’re advised to seek the guidance of a bankruptcy attorney to help you develop your repayment plan, which generally will see you paying creditors less than what you actually owe them.

One final benefit of a Chapter 13 filing is that cosigners on your consumer loans are largely protected from collection efforts, so long as you complete your repayment plan. In a Chapter 7 filing, creditors can immediately come after your cosigners once your debts are discharged.

WHAT CHAPTER 13 DOESN’T DO

During the repayment period, you cannot assume new debt obligations without the approval of the bankruptcy court. Say you come across a home that you’d love to purchase and move into. The court would have to approve the transaction. Likewise, if you need to purchase a new car because yours is on its last legs, the court will decide whether you can.

Some debts, however, cannot be discharged through any type of bankruptcy. These include most student loans, spousal and child support payments, and most taxes.

Also, Chapter 13 does not protect against sudden upticks in fortune, for instance, getting a nice raise at work. The raise will likely be computed into your disposable income and become part of your repayment plan. If, on the other hand, your income goes down, you may be able to reduce your monthly payment obligation.

THE FILING PROCESS

When filing for Chapter 13, you will be required to submit documentation for all of your income and debts so that your disposable income can be determined and creditors advised of your filing.

As discussed above, you will have to submit a repayment plan for consideration by creditors at their meeting with you. You will also be required to pay filing fees and provide proof that you completed an authorized credit counseling course within the previous 180 days.

A bankruptcy filing commences with what is called the “automatic stay,” which prevents creditors and bill collectors from ever contacting you again. It also stops repossessions and foreclosures, but only long enough for you to work out a way to satisfy your secured creditors.

HOW LEGAL COUNSEL CAN HELP

Filing a Chapter 13 bankruptcy is not a simple fill-out-one-form process. There are layers of documentation required, including the repayment plan itself. This is probably more than an average person could do on their own. You could end up entangled with creditor disputes over your repayment plan and have to go back to the drawing board or face a Chapter 7 liquidation.

Get an experienced bankruptcy attorney involved from the moment your debts become unmanageable and overwhelming. Don’t wait until matters get even further out of hand.