The federal bankruptcy code provides for multiple types of bankruptcy in North Carolina, including:
- Chapter 7
- Chapter 11
- Chapter 12
- Chapter 13
Each chapter helps individuals, couples, or businesses escape severe financial trouble. However, the petitioner’s rights and obligations vary according to type. Which type you are eligible to file depends on who you are and why you file.
Chapter 7 bankruptcy is available to individuals, couples, and businesses. It requires petitioners to sell off what are called “nonexempt assets.” The money from the sale will go toward paying off debts. Nonexempt assets may include:
- Valuables and jewelry over a specific value
- Houses or property that do not serve as your primary residence
- Work or business equipment over a particular value
If you do not own nonexempt assets – and many petitioners do not – then you won’t have to sell anything to discharge your debts. Instead, the court will erase your debt, and you can, as the U.S. Courts puts it, get a “fresh start” without worrying about prior financial troubles.
This chapter is open to individuals and to companies of all sizes, but its complexity and high filing fees mean that medium and larger-size businesses more often take advantage of Chapter 11. The goal of Chapter 11 bankruptcy is to give a business time and additional tools to restructure and reorganize to allow them to be more financially stable in the future. If you need to borrow money to do this, you may do so.
As part of your petition, you must file a repayment plan. This plan must:
- Contain specifics about how much of your debt you will repay and how many years it will take you to do so
- Be approved by a majority of your creditors and the bankruptcy court
- Be realistic and attainable. Promising to pay more than you can and then failing to deliver will only cause more trouble
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Chapter 12 is available only to struggling family farmers and fishers. It is designed to be more accessible to such petitioners, with:
- Lower filing fees
- Less paperwork
- Fewer laws and regulations to consider
Like with Chapter 11, Chapter 12 petitioners must submit a repayment plan for part of what they owe. Debtors have three to five years to complete repayments, depending on their situation and what types of debt they owe.
Chapter 13 requires fee payments and a repayment plan, just like most other bankruptcy chapters. The main difference lies in the financial situation of the petitioners.
Unlike other chapters, this type of bankruptcy does not “wipe the slate clean.” Instead, it gives petitioners extra time to organize their finances and pay some or all of what they owe. This chapter is ideal for those who have run into temporary, surmountable financial difficulties.
Both individuals and businesses can file under Chapter 13 so long as they have a steady income.
Which Chapter Is Right for Me?
Many people qualify to file under more than one type of bankruptcy. Thus, petitioners find it challenging to determine which chapter provides the most benefits to their situation.
Bankruptcy lawyers understand how to analyze their clients’ situations and pick the chapter that will help them the most. Your lawyer can do this by:
- Meeting with you to discuss your case
- Reviewing all paperwork pertaining to your situation
- Helping you collect the paperwork for submission to the bankruptcy court
- Going over the pros and cons of each option so you can make an informed decision
- Ensuring that you can meet all the obligations (e.g., fulfill the terms of a repayment agreement) of the bankruptcy type you choose
Once you have settled on a type of bankruptcy, your lawyer can file all paperwork on your behalf, meet with your creditors, go to court on your behalf, and much more.
Can I File More Than Once?
If you run into further financial difficulties down the road, you could declare bankruptcy again, either by filing the same chapter as before or a different one. However, you may have a waiting period before you are allowed to refile.
Bankruptcy is a significant step that can negatively impact your finances for years to come. Therefore, it is best to discuss your case with an experienced bankruptcy attorney before making such a serious decision. Your lawyer could even steer you towards less drastic alternatives to bankruptcy.
Call Today to Learn about Bankruptcy
The U.S. Bankruptcy Court for the Eastern District of North Carolina cannot give legal advice to debtors considering bankruptcy. To ensure that you have someone looking out for your interests, call Farmer & Morris Law, PLLC, today at (828) 286-3866. Our bankruptcy lawyers take pride in educating clients throughout North Carolina about the available types of bankruptcy and how we can help them file.