CHAPTER 7 BANKRUPTCY ATTORNEY IN GREENVILLE, NORTH CAROLINA

In 2019, according to statistics compiled by the American Bankruptcy Institute (ABI), 13,531 North Carolinians filed for bankruptcy protection, 5,372 of them choosing the route of liquidation and 8,023 opting for reorganization and repayment. So far in 2020, the numbers are 8,909 overall, with 4,137 choosing liquidation and 4,657 choosing reorganization.

The word bankruptcy strikes fear in the hearts of many. They equate it with failure and fear that it also means losing everything, including the car they drive and the home they live in. Losing everything, however, is almost never the case. The bankruptcy code allows for certain possessions and assets to be deemed exempt from seizure and sale to satisfy creditors. These exempt items can include your residence and vehicle.

What bankruptcy really accomplishes is lifting a mountain of debt from your shoulders, allowing you to make a fresh start in life, both financially and emotionally, without all the entanglements and stress of dealing with creditors and threats of lawsuits.

One bankruptcy option for those who can absolutely not pay off their debts even if they are reduced substantially is known as a Chapter 7 filing. Under Chapter 7, your nonexempt assets will be sold to satisfy creditors, but a Chapter 7 filing is usually quick. Your debt burden may be eliminated within months, and you can move along with your life again.

If you’re facing overwhelming debt obligations in or around Greenville, North Carolina, or throughout eastern North Carolina, contact Cannon Law Offices, PLLC. We have extensive experience in helping people achieve a fresh start through bankruptcy. Let us assess your situation, advise you of your options, and guide you through the bankruptcy process all the way to final discharge.

WHAT IS CHAPTER 7?

Chapter 7 is also known as a “straight” bankruptcy. It involves handing over nonexempt assets to the trustee assigned to your case and using the sale of those assets to cover, partially at least, the debts you’ve incurred. While this may bring up images of a moving van pulling up and movers taking everything away, that’s not really what happens. North Carolina, like all states, allows for exemptions.

However, North Carolina is a bit different in letting you apply these exemptions. To file for bankruptcy in the state, you must be a resident for 180 days, but to use North Carolina’s bankruptcy exemptions, you must be a resident for 730 days (two years). If not, then you are allowed to use the exemptions from your previous state of residence.

When considering bankruptcy, most people worry about keeping their homes and vehicles. North Carolina allows a homestead exemption on your home of up to $35,000 in equity, which is doubled if your spouse is on the title with you and you both file for Chapter 7. The exemption rises to $60,000 for a single filer who is 65 years of age or older or whose spouse has died.

You can also exempt up to $3,500 of equity in a vehicle, but not if you purchased the vehicle within 90 days of filing for protection. You are allowed $5,000 in exemptions for clothing, household goods, furnishings, appliances, books, and the like. You get an additional $1,000 in exemptions per dependent up to a total of an extra $4,000. Tools of the trade are exempt up to $2,000.

You also get to retain all your qualified retirement savings and pension plans, as well as up to $25,000 in a qualified college savings account. Public benefits such as workers’ compensation and unemployment insurance are unaffected and untouched. Compensation from a personal injury or wrongful death lawsuit is also exempt.

AUTOMATIC STAYS

Once you file, you will be granted what is called an “automatic stay” by the bankruptcy court. This means that all credit collection calls and repossession and foreclosure efforts must cease.

While the creditors and bill collectors are forever banned from contacting you, secured creditors – such as those holding your home mortgage or your car loan – can petition the court to proceed with taking back their collateral, i.e., your home or car. In the case of secured loans, the stay gives you time to try to refinance or make another arrangement but doesn’t stop adverse actions forever.

Moreover, you should be advised that certain debts cannot be discharged in bankruptcy and would not be subject to the automatic stay. These include most student loans and any child or spousal support payments you are making, along with any debts that were acquired fraudulently. Any debt incurred within 90 days of filing is also not dischargeable. Unpaid taxes generally cannot be discharged either.

QUALIFYING FOR CHAPTER 7

Under the bankruptcy code, to qualify for a Chapter 7 liquidation plan, your income must pass a means test. This requires that your gross income be lower than your state’s median income. The median family income in North Carolina in 2019 was $57,431, whereas nationwide it was $65,712. However, the median income for bankruptcy purposes will be calculated based on the number of members in the household.

Remember, you must be a resident in the state for 180 days to file and 730 days to use the state’s exemptions. You will also be required to take a qualified credit counseling course and present a certificate of completion when applying for bankruptcy.

WHEN IS CHAPTER 7 A GOOD BANKRUPTCY OPTION?

A Chapter 7 liquidation filing is a good option when your assets are all protected by exemptions or when you have few assets to be sold off. It also may be your only option if you don’t qualify for a Chapter 13 reorganization plan.

Under Chapter 13, if you have enough disposable income left after your living expenses, you can use those funds to satisfy creditors. You basically develop a repayment plan over a three- to five-year period, after which you are debt-free. The plan can reduce your obligations so creditors won’t necessarily receive everything owed them. Your plan must be approved at a court-supervised meeting of creditors.