Schedule a consultation with an experienced bankruptcy lawyer to discuss your financial situation in detail. We do not charge a fee for this initial consultation since we feel that it is important to spend some time with you to determine the best solutions for your financial problems.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is best suited for people who are not behind on their home mortgage and vehicle loans (if they want to keep the home and vehicles) and who have large amounts of unsecured debt such as credit cards, medical bills, etc. A Chapter 7 bankruptcy will discharge most of your unsecured debt, which means that you will no longer have a legal obligation to repay those debts (Chapter 7 bankruptcy will not discharge student loans, alimony, child support and most taxes). As part of a Chapter 7 bankruptcy, you can surrender any property that has a secured loan against it such as a home mortgage or auto loan. This means that you will no longer have any personal liability for that loan, no matter how much the lender loses at a foreclosure sale or repossession auction. This is often done by people who have a vehicle that is in poor condition or a vehicle that is "underwater," where the value of the vehicle is far less than the loan against it. With the plummeting values of real estate during the past several years, we are now seeing more people surrender their homes. Values of real estate are negatively affected when there are increased numbers of foreclosed properties nearby. Your eligibility to file a Chapter 7 bankruptcy will also depend upon whether your income will qualify under the means testing requirement of the Bankruptcy Code (see below).
What Is The Means Test?
The Bankruptcy Code was revised in 2005 to include a means test for Chapter 7 bankruptcy filings. The means test sets guideline incomes for different size households. If you exceed the income for your household size you may not be able to file a Chapter 7 bankruptcy and your only alternative will be a Chapter 13 bankruptcy as described below. An experienced bankruptcy attorney can advise you as to whether your income creates what is known as a "presumption of abuse.” As of November 1, 2014, means test guideline incomes were set as follows:
- 1 person household = $ 40,412
- 2 person household = $51,857
- 3 person household = $56,782
- 4 person household = $69,370
- Each additional household member above 4 will add another $8,100
Chapter 13 Bankruptcy
This is complete debt reorganization which can allow you to catch up on your delinquent mortgage payments and auto loan payments. It’s best suited for those who exceed the means test income limits for Chapter 7, who are behind on their home mortgage or vehicle loan payments, or who have too much equity in property exceeding the allowable exemptions. Chapter 13 plans last anywhere from 36 months to 60 months and, if you have a consistent income from employment, retirement or other benefits such as Social Security, depending on the amount of your monthly income, you can stop foreclosures and vehicle repossessions and catch up your home mortgage or vehicle loan arrearages through a Chapter 13 plan.
Do You Have A Vehicle Financed?
Reaffirmation agreements are typically required in Chapter 7 bankruptcies for financed vehicles that you wish to keep. Under the 2005 revisions to the Bankruptcy Code, if you wish to keep such a vehicle, you can be required to execute a reaffirmation agreement, if requested by the creditor. This means that you are giving up your bankruptcy protection with regard to that loan. You can always surrender your vehicle in a bankruptcy if the vehicle is in poor condition or "underwater.” Surrendering the collateral means you will not have any personal liability for that loan. Home mortgages do not require reaffirmation.
How Do We Protect Your Property?
We will explain "Exemptions" which allow you to keep your property. With the Exemptions allowed in North Carolina, you can protect your net equity in your property. Net equity means the fair market value of your property minus any loans against that property. For instance, if you own a house that has a value of $100,000 and you have a loan (mortgage) against that property in the amount of $75,000, then your "net equity" in that property is $25,000.
Exemptions which allow you to protect net equity in your property are as follows: $35,000 ($70,000 married) for your homeplace (homestead exemption) - if you are 60 years old and widowed, a higher exemption may apply; $3,500 for one vehicle per filer; unlimited amount for IRAs, 401Ks, 403(b)s or other ERISA-qualified retirement plans; up to $9,000 per filer (depending on the number of dependents) for household furnishings, appliances and personal effects; and up to $5,000 per filer as a "wild card,” if you have not used your entire homestead exemption, to apply against any of your property.
Most clients are able to keep their property using the exemptions described above to protect their home and vehicles, as well as their household and personal effects. If your net equity exceeds the amount allowed as exemptions, you can either surrender the property, settle with the Trustee in Chapter 7 bankruptcy cases, or file a Chapter 13 bankruptcy. A Chapter 13 will allow you to keep your property, even if it exceeds your exemptions by a significant amount. The excess equity will affect your Chapter 13 payment. We'll also give you some tips on how to start rebuilding your credit right away. We'll never pressure you into making a decision about filing. It's your decision, and it's a tough decision. Our bankruptcy lawyers explain the facts. You decide.