Bankruptcy is a specific legal term that covers a set of federal laws that are designed to help people and businesses that have more debt than they can pay. For many, declaring bankruptcy means a fresh start and the chance to live life without a cloud of massive debt over their heads.
Declaring bankruptcy does not mean an automatic erasure of debts, however. That is a common misconception. In some cases, all debts are discharged or forgiven. In other cases, the goal of bankruptcy is to make it possible for a debtor to make some kind of repayment to creditors. This can involve liquidating property, restructuring or modifying debts, and developing a payment plan that can be used to make restitution to creditors.
How a Bankruptcy Case Is Filed
An individual, couple, or business can file a petition with the bankruptcy court. The petition for bankruptcy needs to contain extensive information regarding the filer’s assets, liabilities, creditors, and financial history.
The filing of this petition puts a stop to any efforts creditors are making to collect on debts owed. A creditor will be unable to file suit, garnish wages, or call the petitioner and demand payments on debts once bankruptcy has been declared.
For a legal consultation, call 828.286.3866
Different Types of Bankruptcy
There are multiple types of bankruptcy. The most common types are:
Simply put, this type of bankruptcy is about creating a fresh start for those who qualify for Chapter 7 bankruptcy. With limited exceptions, all debts are forgiven or discharged by order of the Bankruptcy Court. Both individuals and small businesses can file for Chapter 7 bankruptcy.
All of a debtor’s non-exempt assets properties are sold, and the money raised paid to creditors. Many people, however, find that they do not have any non-exempt assets. As a result, they are able to file Chapter 7 bankruptcy and retain all of their assets.
This type of bankruptcy is more of a reorganization. It may be used to keep a business from dissolving, allowing it to continue operating while creating a plan to pay off its creditors.
This type of bankruptcy is primarily concerned with the operations of family farmers or fisherman.
This type of bankruptcy applies to someone with a regular income. It may allow a debtor to keep their non-exempt assets while creating a plan to pay off creditors over time. It may also allow a debtor to restructure certain types of secured debts to get a lower monthly payment or interest rate. Chapter 13 repayment plans are three to five years long.
It is also important to know about exempt assets and property and about some specific rules in North Carolina. Bankruptcy is not designed to leave you homeless or without a vehicle that you need to get to work. That is why some assets or properties are considered “exempt” in a Chapter 7 bankruptcy. North Carolina has its own set of state law exemptions. Assets that you may exempt from liquidation in North Carolina include:
The state’s homestead exemption may protect up to $35,000 in equity in a property that is used as a residence. That exemption can rise based on the age of the debtor and other factors, in accordance with the North Carolina General Statutes (GS) §1C-1601. This exemption exists because the goal of a bankruptcy filing is not to leave you homeless. The homestead exemption can also cover equity in burial plots.
A Motor Vehicle
The North Carolina motor vehicle exemption may allow you to exempt up to $3,500 in equity in one motor vehicle. After all, if you are going to pay off debts, you need a way to get to work.
Tools or Professional Items
North Carolina allows you to exempt up to $2,000 in professional tools or books used in your trade. This is to allow you to retain the tools you need to continue making money and paying down debts.
Retirement Plans and Savings Accounts
Certain types of retirement plans and savings accounts are subject to North Carolina bankruptcy objections.
You Do Not Have to File on Your Own
If you are thinking about filing for bankruptcy in Rutherfordton, North Carolina, know that you do not have to navigate this complex system on your own. Instead, Farmer & Morris Law, PLLC may be able to help you.
We help individuals and small businesses with Chapter 7 and Chapter 13 bankruptcy cases. We also handle Chapter 12 bankruptcy for family farmers and Chapter 11 reorganization bankruptcy.
Call Farmer & Morris Law, PLLC today at (828) 286-3866 and learn more about what declaring bankruptcy means for you. A lawyer from our firm may be able to help you file and get that fresh start you have been looking for.