Filing A Small Business Bankruptcy

Filing a small business bankruptcy in North Carolina is an endeavor which will relieve you of your personal obligations on business debt. For most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goals.

While Chapter 11 is designed for traditional business bankruptcy filings, it is an expensive bankruptcy option that costs debtors tens of thousands of dollars. There are times when a Chapter 11 is the appropriate avenue for a corporate entity to enter into bankruptcy and continue to do business. More often, in a small business bankruptcy setting, a Chapter 7 or Chapter 13 will serve to meet your goals, and save you thousands of dollars.

Debt With A Personal Guaranty

As part of preparing for bankruptcy, you must review your debt obligations with the help of your bankruptcy attorney. Specifically, it is important to distinguish between debt which is to the corporate entity only, and debt which includes a personal guaranty. The dissolution of the corporate entity serves to relieve the corporate entity of the obligation on the debt; the personal bankruptcy filing will serve to address the personal guaranty.

Anti-Bankruptcy Clauses In Contracts

Many corporate debt contracts contain language specific to bankruptcy. Those contracts often dictate that a bankruptcy filing will not serve to relieve the personal guaranty or other obligations to repay the debt. While this language is freely entered into by both parties signing the contract, courts have rules it to be in conflict with public policy. Our firm will defend any challenges to the discharge of your corporate debt, specifically challenges premised upon an anti-bankruptcy clause.

Profit and Loss Statements

Qualifying for Chapter 7 requires a thorough review and disclosure of your income for the 6-month window prior to the filing. When operating as a small business, debtors are typically not paid as W-2 employees. LLC members and partners take draws and often those draws differ dramatically from month to month, depending upon the profitability of the business. Additionally, while bankruptcy is available for debtors who qualify from an income perspective, you must demonstrate to the bankruptcy court your income, as defined by the bankruptcy court. This necessitates the submission of a profit and loss statement showing actual gross income, less actual expenses. Our firm will guide you through this process. We can help to create your profit and loss statement or advise a third party—typically an accountant—who you might retain to prepare it for you. For small businesses which have not had much income over the 6-12-month window prior to filing, often the profit and loss statement is easily created.

Call For A Consultation

We know the stress of running any small business. When you’re facing financial difficulties, it can be overwhelming. We’re here to help. Call us for a free consultation at 704.749.7747 or click HERE to make a simple request to be contacted. We will reach out to speak with you or schedule a time to speak. Your financially recovery is right around the corner, and we hope you choose to Recover With Us.

5 Myths Surrounding Bankruptcy

Bankruptcy is surrounded by myths, and they keep eligible individuals from pursuing what can be an amazing way out of crippling debt and financial stress. You deserve freedom from the anxiety caused by the myths surrounding bankruptcy. We hope this article helps. And if you have any questions, we’re here to answer them. Just reach out to us.

#1 All Bankruptcy Filings Are The Same

To understand and debunk some of the myths about Chapter 7 bankruptcy, we must first understand how Chapter 7 bankruptcy differs from Chapter 13 bankruptcy. While both are consumer bankruptcy options, Chapter 7 bankruptcy is typically used in a situation where the client has limited income and assets, and does not have the ability to pay back all or even some of their debt. Chapter 13 bankruptcy is a tool for catching up on a delinquent secured debt like a mortgage or car. It is also a compromise where you pay back some of your debt while completing a court approved repayment plan.

#2 Bankruptcy Will Stay On My Credit Report Forever

While effects of a Bankruptcy on your credit report can vary due to the case, the credit reporting of a Chapter 7 bankruptcy lasts a maximum of ten years. Some credit reporting agencies remove the bankruptcy after seven years. Some of these credit report references to bankruptcy include trade lines that state that your account was included in bankruptcy, and third party collection debts, judgments, and tax liens discharged through bankruptcy. More importantly, your credit score and your ability to get a loan or credit card recovers much faster than this time frame. We see this with clients year after year.

#3 My Credit Score Won’t Improve Until The Bankruptcy Is Gone From My Credit Report

While your post-bankruptcy credit score will show a drop after filing, you will be surprised at how quickly your credit score begins to recover. One reason is that by way of the bankruptcy, your debt to income ratio improves in your favor. Additionally, creditors are more likely to lend you money because they know you have no other debt, and they know you can’t file bankruptcy again. Often, the same creditors you included in your bankruptcy filing will offer you new extensions of credit shortly after you file.

Obtaining a secured line of credit and making payments on it, or taking out a new credit card and making payments on it, will help you to raise your credit score with the goal of hitting the range of 700-749 over time. Making on-time payments for all debt, adding and paying new credit, and keeping your credit card balances under a thirty percent utilization are all examples of ways to boost your post-bankruptcy credit score.

#4 I’ll Never Have Credit Cards Again

While we secretly hope this is true for you, we hope it’s because you choose to never have a credit card again. The truth is, as this article has indicated so far, you’ll be given lots of opportunities to have a credit card after filing bankruptcy. Truthfully, credit cards are actually one of the best ways to build credit, and options for those post-bankruptcy do in fact exist.

Credit cards that require an upfront security deposit, are called secured credit cards and have a lower barrier of entry but allow you to spend and rebuild credit just like any other kind of credit card. After you make consistent payments on a secured credit card, you will see your credit score increase and other credit opportunities arise.

#5 I’ll Never Get A Home Loan After Filing Chapter 7

Similar to credit cards, when paid on time, loans help you to rebuild your credit score and certain loans are easier to receive after having filed bankruptcy. Credit builder loans, CD loans, or Passbook loans, are similarly secured with a deposit or collateral and will all help to rebuild your credit score. These loans are easier to procure due to the simple fact that the lender is protected in the event that you are unable to pay, which makes them a great opportunity to rebuild credit score in the meantime. If you’re repaying a vehicle loan, you’ll also see the benefits by way of an increase in your credit score.

Generally, at the two year mark after filing bankruptcy, our clients who have diligently re-built their credit after bankruptcy, find they are eligible for a mortgage. A more conservative estimate would be two to four years; however, we receive so many phone calls at the two year mark from clients who are excited because they are buying a home, that it’s worth mentioning here.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article regarding myths surrounding bankruptcy was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

 

How To Avoid Wage Garnishment – File Bankruptcy

If you need to avoid wage garnishment in North Carolina, filing bankruptcy is most likely your best option. While North Carolina limits the type of debts which can be garnished, if you want to avoid wage garnishment altogether, bankruptcy is an option which will halt wage garnishment under federal law.

North Carolina Types Of Wage Garnishment

Generally, North Carolina limits the type of debts that can be garnished. Child support, Student Loans, Taxes, Ambulance Bills, and Unemployment Over payments can be garnished. Additionally, if a general unsecured creditor obtains an out-of-state judgment, they may be able to garnish wages in North Carolina.

General Limitations On Wage Garnishment

North Carolina does limit the amount of your wages which can be garnished. Below are a few times of garnishments and the general limitations placed upon them.

The North Carolina Department of Revenue — (Taxes) can only garnish 10% of your gross wages.

Out of state creditors — can garnish 25% of your disposable income or the amount by which your disposable income exceeds 30 times federal minimum wages, whichever is less.

Child Support – can be garnished up to 50% of your disposable earnings.

Defaulted Student Loans – can be garnished for up to 15% of your disposable income.

How Can Bankruptcy Help With Wage Garnishment?

When you file bankruptcy, the Automatic Stay in bankruptcy prevents creditors from contacting you and attempting to collect on debt. Wage garnishment is of course an attempt to collect a debt. The court notifies your creditors about the filing of your bankruptcy, and they are bound to abide by the Automatic Stay unless they successfully apply for relief from the Automatic Stay. Most creditors do not pursue relief from the Automatic Stay.

Avoid Wage Garnishment With Chapter 7

If you file a Chapter 7, typically your Chapter 7 filing will only give you temporary relief from most of the types of debts which are associated with wage garnishment. The types of debt that can potentially be addressed in full with a Chapter 7 filing are: judgments from general creditors, tax debt older than 3 years old, judgments from mortgage and vehicle debt. While a Chapter 7 filing won’t address child support, student loans, or new tax debt, it will give you roughly a 4 month break from it. The reason is that most creditors simply wait for your Chapter 7 to close out and then begin to attempt to collect or garnish debt at that time. Many times, filing a Chapter 7 eliminates enough other debt that you can successfully address the debt which survives the Chapter 7. We’re happy to walk you through it.

Avoid Wage Garnishment With Chapter 13

Chapter 13 not only stops wage garnishment, but forces all garnishing creditors to allow you to propose a 5 year plan to repay that debt. Most of the time, paying that debt back over a 5 year period—with caps on interest and penalties—makes the debt manageable. In addition to helping you avoid wage garnishment, the Chapter 13 also forces vehicle lenders to lower their interest rate to the court-ordered “Till”rate which may be lower than you are paying on your vehicle loan currently. There are numerous other benefits to a Chapter 13, and if you reach out to us we can quickly help you decide if you should consider a Chapter 13 filing.

Bankruptcy Vs. Garnishment

In all but the most rare cases, the amount you will pay to file a bankruptcy will help you save thousands of dollars over wage garnishment. It also forces creditors to allow you to keep enough of your paycheck to live comfortably while ‘catching up’ on your debt in Chapter 13, or quickly eliminating it in Chapter 7.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

Can I File Bankruptcy Again?

If you’re thinking about filing bankruptcy again, you will need to know whether you received a discharge in your prior bankruptcy filing. Most of the rules regarding whether you can file bankruptcy again depend upon whether you received a discharge. If you’d like to speak with someone to get an answer, simply call us at 704.749.7747 or click HERE to request a free phone consultation.

If You Filed A Prior Chapter 7

If your prior bankruptcy was a Chapter 7, and you received a discharge, you must wait 8 years from the date you filed your previous case. After the 8 year mark, you can file Chapter 7 again in North Carolina.

If your prior bankruptcy was a Chapter 7 and you would like to file Chapter 13, you will need to wait 4 years after the filing of the Chapter 7.

If your did not receive a discharge in your prior bankruptcy filing, simply call us and we will pull your prior bankruptcy filing from the online database. We will be able to tell you when you are eligible to file bankruptcy again. If your prior case was discharged With Prejudice, then you usually only have to wait 180 days to file again. Your bankruptcy attorney may need to file a motion to put the Automatic Stay in effect for your new bankruptcy filing. This is an important step that needs to be taken if you’ve recently filed a bankruptcy which was dismissed.

If You Filed A Prior Chapter 13

If you received a discharge in your prior Chapter 13, you must wait at least 2 years after the date the first case was filed, if you want to file another Chapter 13. If you would like to file Chapter 7 after a successful Chapter 13, you must wait six years to file bankruptcy again. You will need to pass The Means Test in Chapter 7, and we will assist with that.

If you did not receive a discharge in the Chapter 13, and the court has not placed any restrictions on re-filing, then you can file a Chapter 7 immediately after the Chapter 13 is dismissed.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy again, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

Can I File Bankruptcy Without My Spouse?

Yes, you can file bankruptcy without your spouse. When deciding whether to file bankruptcy with or without your spouse, there are a few factors to consider. We’re here to help you sort through the decision-making process and make the best choice for you and your family. Click HERE to request a free consultation, or call 704.749.7747 to speak with an attorney.

Examining Your Joint Debt Before Filing

The primary purpose of filing bankruptcy is to free yourself from debt. Bankruptcy is typically referred to as a Fresh Start. Because of the powerful relief offered by a bankruptcy filing, you truly do get a fresh start after your case closes. For this reason, our first priority with clients is to make sure we are discharging as much debt as possible in bankrutpcy. Quite often, this analysis will answer the question whether to file bankruptcy with or without your spouse.

For a household that has $100,000 in credit card debt, a Chapter 7 or Chapter 13 filing will provide much needed relief. If half of that debt is joint debt between you and your spouse, the bankruptcy filing would only provide your household with half of the available relief, which we see as a bad result.

Can I File Bankruptcy Without My Spouse If We Have Joint Debt?

If you and your spouse are both debtors on a credit card debt with a balance of $10,000, your bankruptcy filing will relieve you of your obligation to repay that debt; however, if your spouse does not join in the filing or file her own bankruptcy, she will still be liable for the entire $10,000 balance on the debt. As a result, unless there is a pressing reason to not file a joint bankruptcy, we strongly encourage it.

Preserving The Credit Score Of One Spouse

One strategy for not filing a joint bankruptcy is that you want to preserve the credit score of one spouse, for future purchases and credit. While this may have some appeal, more often than not it is misguided. Unless clients are planning on purchasing a new home shortly after the bankruptcy filing of one spouse, preserving your credit score is usually a high price to pay for continuing to carry burdensome debt as a married couple. We have written extensively about how your credit score will recover after bankruptcy, and the news is good. In fact, our favorite bankruptcy clients are those individuals and couples who have already purchased a home and have working vehicles—they can wait the year or two after bankruptcy for their credit scores to recover, before entering into large credit transactions.

Household Income In A Bankruptcy Filing

There may be instances where one spouse makes more income than the other. In these situations, you may think the spouse with lower income can file bankruptcy despite the income of their spouse. For better or worse, the bankruptcy court looks at the income of the entire household when determining whether you pass The Means Test in bankruptcy. As a result, both your income and your spouse’s income will need to be considered when determining whether you qualify to file Chapter 7. Additionally, if you’re considering  Chapter 13 filing, your household income will be a factor in determining your Chapter 13 payment.

Fortunately, if one spouse is filing and the other is not, there is an opportunity to take what is known as a Marital Adjustment when calculating household income. In this instance, we are able to exclude any household income which the non-filing spouse is spending on him or herself. This includes, but is not limited to: hobbies, health insurance, food, vehicle, etc. When these expenses are carefully investigated, quite often they make the difference for passing The Means Test.

Joint Mortgages In Bankruptcy

Filing a bankruptcy without your spouse will not affect a joint mortgage negatively. In a Chapter 7 filing, you will need to be current on the mortgage when filing, or make a decision to surrender the property to the bankruptcy court. In Chapter 13, one spouse can use the bankrutpcy filing to get ‘caught up’ on the mortgage; in the meantime, so long as the Chapter 13 payments are consistently made, the non-filing spouse will be protected from the mortgage creditor, the same as the spouse who filed the bankruptcy.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article regarding “Can I file bankruptcy without my spouse?” was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

Is Loan Consolidation Better Than Chapter 7?

Loan consolidation or “Debt Consolidation”, is when a debtor combines their existing debt into one loan. Typically, filing a Chapter 7 bankruptcy will yield a much better result for the debtor and at a fraction of the price of loan consolidation. This is true even of an Emergency Bankruptcy filing.

A loan consolidation makes it easier for the debtor by allowing them to pay one creditor instead of numerous creditors. This typically results in a lower monthly payment due from the debtor. The loan consolidation company negotiates a lower balance on your debt for you, and in exchange you make your payments on an agreed upon schedule. When you have made your last payment, you will have a zero balance on each debt.

Pitfalls Of Loan Consolidation

Taxation On Forgiveness Of Debt— You will achieve dramatically different results regarding taxation, depending upon whether you choose loan consolidation or Chapter 7. In many instances, the lowered balance on your debt is considered forgiveness of debt. For example, if you owe $10,000 on a credit card and the loan consolidation company negotiates the balance to $7,500, you may have $2,500 of forgiveness of debt. The federal government considers this to be income. Come tax time, you will most likely receive a notice of $2,500 of income related to forgiveness of debt. You will then owe the taxes on that $2,500 just as if you had earned it as an employee. This comes as a surprise to many debtors and can undo the benefits of the negotiated debt. This is similar to the treatment of forgiven debt in a foreclosure outside of bankruptcy.

Default Penalties— The contract you sign with a loan consolidation company will be lengthy and complicated. Typically, it will include hefty penalties for failing to make your payment on time. In many cases, even one missed payment can result in you losing the benefits of the loan consolidation.

Exorbitant Fees— The fees charged by loan consolidation companies are a new element of your debt. Identifying the exact fees can be challenging due to the complexity of the contract you sign. In worst case scenarios, you may be sending more than 10% of your monthly payment to the loan consolidation company as a fee for managing your debt.

No Protection Against Creditors— Unlike Chapter 7 bankruptcy, you may find a creditor fails to cancel your debt in exchange for the payments you make through loan consolidation. You will also find the debt consolidation company often has no answer as to how to resolve this situation. You may end up arguing with a large lending institution about the balance on your debt. Without an attorney, this can be a tough fight often won by the creditor.

The Chapter 7 Bankruptcy Difference

One difference between loan consolidation or Chapter 7, is that in most cases, Chapter 7 bankruptcy involves a flat fee. As a result, you immediately know the total amount of money you are paying in order to receive a discharge of your debt. In most cases, the Chapter 7 bankruptcy fee you incur to receive a discharge of debt will be thousands of dollars less than the amount you would spend in a loan consolidation program.

Chapter 7 Time frame

While most debt consolidation programs will have a duration of 36 months or longer, your Chapter 7 bankruptcy will typically start and finish within 120 days. We provide clients with an estimated timeline for Chapter 7 when representation begins. During that time frame, you will typically only be required to attend one hearing called a 341 Meeting. Your attorney will attend that meeting with you.

Tax Implications In Chapter 7

One of the most meaningful differences between Chapter 7 and debt consolidation, is with regard to tax implications. In Chapter 7, you receive a full discharge of the debt in question. Additionally, federal bankruptcy law dictates that you will not owe any taxes on the discharge of that debt. This is a meaningful difference when compared to the tax consequences that can result from forgiveness of debt in debt consolidation, as discussed above.

Chapter 7 And Your Credit Score

You should anticipate your credit score will drop more as a result of your Chapter 7 than as compared to debt consolidation. This drop in credit score is minimized if your credit coming into debt consolidation and Chapter 7 is already less than perfect. On an equally important note, improving your credit score after bankruptcy is faster and easier than you might think. The primary reason for this is that the filing of a Chapter 7 dramatically decreases your debt. Your credit score is determined by many factors. One of those is your debt to income ratio. When your debt decreases and your income stays the same—as it does when you file Chapter 7—the result is a better debt to income ratio for your credit score. We have written on an article about Chapter 7 and your credit score, which may be helpful.

Chapter 7 And Protection Against Creditors

One amazing and powerful benefit of filing Chapter 7 is the Automatic Stay. The Automatic Stay goes into effect the moment you file your bankruptcy, and it prevents creditors from taking action to pursue collection of their debt. This means foreclosure proceedings come to a halt, as do court cases, phone calls, and letters from creditors.

The rights of creditors in Chapter 7 are dictated by the federal bankruptcy code. Unless you have too many assets or too much income for Chapter 7, there is virtually nothing your creditors can do to prevent a successful Chapter 7 filing. Your Charlotte bankruptcy lawyer will make sure to review your case with you from these perspectives, well before filing.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article regarding loan consolidation or Chapter 7 was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

Bankruptcy And Foreclosure

If you’re considering bankruptcy and foreclosure proceedings have started, you need to act quickly. Filing a bankruptcy will stop a foreclosure proceeding; however, you will need a plan to either repay the mortgage lender over time in Chapter 13, or surrender the property within roughly sixty days of filing the bankruptcy.

Bankruptcy And The Automatic Stay

When you file your Chapter 7 or Chapter 13 bankruptcy, the Automatic Stay goes into effect. This protection means that creditors—including your mortgage lender—are no longer allowed to try to collect on a debt. Foreclosing on property is the equivalent of attempting to collect on debt. As a result, when you file bankruptcy, all foreclosure proceedings come to a halt.

Foreclosure And Chapter 7

If you are behind on your mortgage and you file Chapter 7, the bankruptcy filing will serve to temporarily stop foreclosure proceedings. Because Chapter 7 makes no allowance for paying a mortgage lender, you will need to either make payments to the mortgage lender to get current, or plan to surrender the property in bankruptcy.

When you go through a foreclosure, if your mortgage lender sells the property and the proceeds from the sale are not enough to satisfy the debt, the mortgage lender can pursue you for the remaining balance. Chapter 7 protects you from this result. If you surrender your property in a Chapter 7 bankruptcy, the lender will not be able to pursue you for any shortages when they sell the property. In essence, any remaining debt is discharged by the bankruptcy filing.

Lastly, if a lender ‘forgives’ any remaining debt, you may receive a 1099 form from the federal government for forgiveness of debt. You will be responsible for the taxes on that forgiveness of debt, as it is treated as income for tax purposes. However, once again, Chapter 7 relieves you of this burden.

Foreclosure and Chapter 13

A Chapter 13 filing allows you to force your mortgage lender to allow you to ‘catch up’ on your mortgage over time. Typically, a Chapter 13 plan is a five year plan. If you are facing a foreclosure and want to keep the home, a Chapter 13 filing can allow you the time you need to continue making your normal mortgage payments while also slowly repaying the mortgage lender for whatever amount you were behind at the time you filed your Chapter 13.

You can also surrender a home in Chapter 13. As a result, you will be afforded the same protections against foreclosure you receive in Chapter 7, which are outlined above.

How Long Will Bankruptcy Hold Off A Foreclosure?

If you file a Chapter 13 and your plan proposes to pay the lender over time, the foreclosure proceeding will stop and as long as you continue to make your Chapter 13 plan payments, you will not face the threat of foreclosure. Additionally, at the end of the Chapter 13 plan, you will be current on your mortgage.

If you file Chapter 13 or Chapter 7 and do not make provisions to repay the lender the amount you are behind, you can expect that the filing of the bankruptcy will temporarily stall the foreclosure proceedings by about 60 days; however, your lender will typically file a motion for relief from the automatic stay. That motion will be approved by the court, and the lender will be allowed to proceed with their foreclosure.

If your foreclosure sale is coming up quickly, you may consider filing an Emergency Bankruptcy, and we can assist with that filing. The Emergency Bankruptcy allows you to receive the protection of bankruptcy while you work with your attorney to gather the required documentation for a normal bankruptcy filing.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article about bankruptcy and foreclosure was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

Filing Bankruptcy With A Pending Lawsuit

If you file bankruptcy with a pending lawsuit, the legal action against you will come to a halt pursuant to the Automatic Stay in bankruptcy. This means the creditor attempting to turn your debt into a judgment they can execute will be prevented from taking further action. Any attempt to do so would amount to an Automatic Stay Violation. This is true so long as the Automatic Stay is in effect, and will be true ongoing, provided you receive a Discharge in your Chapter 7 or Chapter 13 bankruptcy filing.

When Debts Escalate To Lawsuits

It is one thing to be behind with a creditor. It is another thing entirely to be faced with a lawsuit filed by a creditor. Presumably, the creditor is pursuing a judgment in court. With a judgment in place, the creditor has more ways to attempt to collect on their debt. These include potential wage garnishment, forced sale of assets, and foreclosure.

In a past article, Is The Sheriff Coming To My House?, we addressed the process by which a creditor can attempt to enforce their judgment once they obtain one in court. However, by filing bankruptcy you will invoke the powerful protection of the Automatic Stay and prevent the creditor from moving forward.

Notifying The Lawsuit Creditor Of Your Bankruptcy

In a past article, we discussed Who Will Notify My Creditors When I File Bankruptcy? However, this instance is more specific and relates to making sure a legal action against you comes to a halt prior to a judgment being placed on record. While the federal bankruptcy court will send notice of your bankruptcy to your creditors, we make sure to notify the lawsuit creditor immediately upon filing the bankruptcy. We also send notice to the county courthouse where your proceeding is most likely filed. This alerts the county court system that a bankruptcy has been filed and the case must come to a halt until further notice.

Filing An Emergency Bankruptcy Petition

You may choose to file an Emergency Bankruptcy Petition in order to prevent a creditor from obtaining a judgment. This is a process by which you are allowed to file bankruptcy prior to having all the paperwork completed. The court then gives you fourteen days to file the remainder of the paperwork- don’t worry, our office assists with meeting all of the emergency bankruptcy filing requirements to make sure your bankruptcy petition is not dismissed.

What If My Creditor Does Obtain A Judgment?

If filing bankruptcy with a pending lawsuit doesn’t work out and your creditor gets a judgment before you file, that’s ok. We can file a motion together with your bankruptcy filing, to have the judgment removed from your record. This means that when you sell your real property (your house), you will not have to pay the judgment. This analysis is case by case and is specific to each debtor and the amount of equity you have in your home; however, we can give you an answer very quickly as to whether you would qualify for this relief.

Speak With A Charlotte Bankruptcy Lawyer Today

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

 

 

Is Bankruptcy Public Knowledge?

Yes, your bankruptcy filing is public knowledge. However, the chance of someone finding out you filed bankruptcy is not as good as you might think. In fact, other law firms routinely call our office to ask us to check to see if an individual or company has filed bankruptcy. The reason it’s difficult for someone to find out you filed bankruptcy is that information is stored on PACER. PACER is an electronic system which stores records. In order to access it, you must register and pay per page for any materials you would like to view. As a result, most PACER users are bankruptcy lawyers, creditors and their attorneys. As a result, the chance your friends, family members and co-workers find out you filed bankruptcy is very small.

Bankruptcy And Your Credit Report

While we have written in the past about bankruptcy and your credit score, it’s important to know that bankruptcy will show on your credit report for up to ten years. This is not cause for alarm, because your credit score is more important than how long bankruptcy shows on your credit report. In fact, unless your credit was perfect before filing bankruptcy, your credit score a year after filing bankruptcy will typically recover to what it was the day before you filed. From there, if you follow a few simple strategies for building your credit score, you will continue building a healthy credit score.

Credit Card Offers

Our clients report to us that they start receiving credit card offers shortly after filing for Chapter 7 bankruptcy. One reason for this is that bankruptcy improves your Debt To Income Ratio. Your debt to income ratio compares your income to the amount of debt you have. When you file bankruptcy, you eliminate a large amount of debt. As a result, your debt to income ratio improves. Creditors see you as a good candidate for credit card offers. First, they know you do not have any other debt to pay. Second, they know you can’t file bankruptcy again for at least 8 years. As a result, you will start to get credit offers, which may surprise you.

Automobile Financing

Most clients are surprised to find out they can keep their car in bankruptcy. However, you may want to obtain a new car just before or just after filing bankruptcy. Even Chapter 13 clients who are in an ongoing bankruptcy, are able to obtain financing for new cars. This surprises many clients. Additionally, the process for getting approved for new vehicle financing in Chapter 13 is quite easy.  Again, another myth of bankruptcy is dispelled by the reality that filing bankruptcy serves to protect you more than it serves to harm you.

Life After Bankruptcy Gives You A Chance To Excel

Yes, bankruptcy is public knowledge. What’s more important is how positively your life will be affected from the day you file your bankruptcy. Without the ongoing debt payments, filing bankruptcy is like giving yourself the raise you deserve. You’ll find you have more money left over each month after paying bills, you can balance your budget and save for special events like birthdays and Christmas, and you’ll even be able to help a relative in need, if you desire. You deserve a second chance, and we’re eager to help you seize the opportunity.

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article “Is Bankruptcy Public Knowledge?” was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.

How Does Bankruptcy Affect Tax Refunds?

Tax refunds are protected in bankruptcy by the bankruptcy exemptions available to all debtors. Your tax refund is an asset, and must be declared as an asset on your bankruptcy case filing. By applying the bankruptcy exemptions to the refund, you can keep the refund.

Bankruptcy Exemptions To Protect Tax Refunds

The Bankruptcy Code provides for debtors to retain property even when filing a bankruptcy. It is for this reason that you can typically keep your home in bankruptcy or keep your car in bankruptcy. The allowances which dictate how much value in an asset is protected in bankruptcy are called Exemptions. Tax refunds are a general asset, and as such, you can protect them by using N.C.G.S. Sec. 1C-1601(a)(2). This is commonly referred to as the “Wild Card” exemption. It allows you to protect up to $5,000 of any asset, including your tax refunds. The exemption applies to each debtor. For a married couple filing bankruptcy, you would have $10,000 available under the Wild Card exemption.

Refunds Received Before Filing Bankruptcy

If you receive your tax refund before you file bankruptcy, you may still need to protect it by using an exemption. It is perfectly fine to spend your tax refund before you file bankruptcy. You may decide to use it to pay for bankruptcy, pay for some home repairs, buy new car tires, or pay for normal living expenses. These expenditures are perfectly allowable in bankruptcy and will not negatively affect your bankruptcy filing. If you have funds remaining from your tax refund when you file bankruptcy, you will use the Wild Card exemption to protect those remaining funds.

Tax Refunds In Chapter 13

If you are filing a Chapter 13 bankruptcy, you will need to disclose your tax refunds each year that you are in the Chapter 13. If your tax refunds are the result of an earned income credit or child tax credit, they are exempt in bankruptcy and you can keep them. Generally, you can also keep the first $1,000 of a tax refund each year. If your tax refund exceeds $1,000, your Charlotte bankruptcy attorney will disclose the refund to the Chapter 13 trustee. This is a good time to also tell the trustee if you have household expenses which you have been putting off. You can propose to keep your tax refund to take care of those household expenses, provided they are not luxurious.

If you are considering filing bankruptcy, it’s important that you speak with a Charlotte bankruptcy attorney. The call is free and you will come away with a much better understanding of your options. You can reach us at 704.749.7747 or click to request a FREE CASE EVALUATION, and we will be in touch shortly.

Further Reading

If this article addressing “How Does Bankruptcy Affect Tax Refunds?” was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.