A bankruptcy blog containing useful information for anyone considering a Charlotte bankruptcy attorney.

How Much Does Bankruptcy Cost?

The cost of a bankruptcy will depend on which Chapter you file. In North Carolina, the cost for a Chapter 13 is set by the court. The cost for a Chapter 7 bankruptcy depends upon the law firm and the specifics of your case.

Chapter 13 Fees

In the Western District of North Carolina, a Chapter 13 bankruptcy is $4,500.00. However, you will most likely not need to pay all of this up front. Each law firm requires a different ‘up front’ (pre-filing) amount to be paid. The remainder of the fees are built into your Chapter 13 plan and are paid monthly to the trustee as part of your ongoing Chapter 13 payment.

By way of example, if you paid $2,000.00 up front before filing, it would leave $2,500.00 to be paid through your plan. If your Chapter 13 plan was 60 months, that equates to roughly $41.50 per month to be built into your Chapter 13 plan.
Your full monthly Chapter 13 payment will depend upon a few factors, including your monthly income and expenses and any priority debt you have. You can read more in our article How Much Will My Chapter 13 Payment Be?

Chapter 7 Fees

While most firms have a standard base fee for Chapter 7 filings, each Chapter 7 is different and requires a different amount of work to be done by the law firm. We do our best during the Free Consultation to discover any specific items which may entail additional work by the firm. A few items which may dictate your Chapter 7 fee are whether you have judgments which need to be addressed, or if we anticipate an objection by a creditor. Lastly, if you have assets which cannot be exempt in bankruptcy, it is reasonable to assume we will need to negotiate with the trustee in an attempt to preserve as many of those assets as possible.

Unexpected Attorney Fees In Chapter 7

There are rarely unexpected attorney fees in Chapter 7. The representation agreement outlines some standardized fees for performing certain tasks, should they need to be performed. Our goal is for each client to know the full extent of attorney fees prior to moving forward with our firm and prior to filing the bankruptcy case. We accomplish this by having thorough conversations with clients and potential clients, in order to discover the full breadth of the bankruptcy filing.

Speak With A Charlotte Bankruptcy Lawyer Today

If you want to know how much filing bankruptcy will cost, we are happy to discuss it with you. We can be reached at 704.749.7747 or you can request a free consultation HERE. We know considering bankruptcy can be stressful. Our promise is to be the support you need as we work to help you take the next steps toward freedom from debt. We know you have choices. We hope you choose Layton Law.

Are You Personally Liable For An SBA Loan?

Yes, you are personally liable for your SBA loan. However, if you wish to verify it, you can have our firm review your SBA loan docs for you. More simply, you will notice that the signature line for the SBA loan was signed once by the company, and another time as the company owner, “Individually”. This is the individual guarantee.

An SBA loan is a loan guaranteed by the Small Business Administration, and issued in partnership with another bank. While the terms of an SBA loan are favorable, you will be personally liable for an SBA loan. This means that if the business fails to repay the loan, the lender can pursue your personal assets.

The Extent Of Your Guarantee

Each personal guarantee is different. You may have a general personal guarantee, or a limited personal guarantee. With an unlimited personal guarantee, in the event of a default, the lender can pursue you personally to the extent of the unpaid loan balance plus fees. In a limited personal guarantee, there will be a limit to your exposure if the company defaults on loan repayment. Your loan language would need to be reviewed to determine if your guarantee is limited or unlimited.

SBA Loans Secured By Real Estate

It is not uncommon for an SBA loan to be secured by your real property (home) or other real estate you or the business may own. In this event, the lender has the additional recourse of pursuing the equity in the property if the loan is not paid in a timely manner.

Negotiating SBA Debt

If you are about to default or have defaulted on an SBA loan, you can negotiate the debt and possibly reach a debt settlement agreement with the SBA. Unlike other debt negotiation, reaching an agreement with the SBA will require the disclosure of much more financial information to the lender. The reason for this is the lender is attempting to assess your ability to pay the loan. Further, they want to know whether you will be able to keep your agreement under the re-negotiated terms.

As a bankruptcy law firm, our firm has had success negotiating SBA loans for debtors on the verge of filing bankruptcy. When faced with getting paid nothing in a bankruptcy, or negotiating a settlement with a borrower in financial trouble, the SBA often offers reasonable terms which the borrower can accept. Our firm negotiates those terms on behalf of the borrower.

Negotiating debt does affect your credit score; however, in the overall picture the temporary drop in credit score is almost always outweighed by the debt relief the borrower experiences by alleviating the monthly payment burden.

SBA In Bankruptcy

SBA loans are addressed in a Chapter 7 personal bankruptcy. Depending upon whether the business is still operating, and whether the guarantee is secured by property, the loan may receive differing treatment in bankruptcy. If you file a Chapter 13 your SBA loan will be addressed as well.

Speak With An Attorney

If you are wondering if you are personally liable for an SBA loan, call us. Consultations are free and you deserve to understand your options. You can reach us at 704.749.7747 or click HERE to request a consultation. We know you have choices. We hope you choose Layton Law.

What Happens To My Mortgage If I File Bankruptcy?

If you own a home and file bankruptcy, you can keep your home and mortgage secured by the mortgage. Depending upon whether you file Chapter 7 or Chapter 13, the course of events that follows the filing of the bankruptcy will be slightly different. One analysis which must be done relates to the equity in your home. Generally speaking, you are allowed $35,000.00 in equity per spouse to keep a home in Chapter 7. This known as an Exemption. In Chapter 13 you can have additional equity beyond those limits; however, it will affect your Chapter 13 payment.

Your Mortgage In Chapter 7

If you own a home with a mortgage and you file Chapter 7, it is important that you are current on your mortgage upon filing the Chapter 7, or by the time of the 341 hearing at the very latest. If you wish to keep the home in Chapter 7, you will continue to make mortgage payments to a bankruptcy department at the mortgage company while the Chapter 7 case is active. Once the case closes, you will resume making payments to the mortgage company in the same manner you did prior to filing.

It is important to note that the filing of a bankruptcy technically discharges the debt (mortgage); however, unless you are planning to surrender the property in bankruptcy, you will need to continue to make mortgage payments.

Unlike reaffirmations for car loans, mortgage debt is very rarely reaffirmed in bankruptcy. Courts frown upon it in an attempt to protect debtors who have recently received a discharge from substantial debt. The American Bankruptcy Institute has written at length about this stance.

If you do not reaffirm your mortgage, provided you stay current on mortgage payments post-bankruptcy, the mortgage lender has no recourse. You keep the house as long as you keep making payments. You receive credit against your balance for all of your payments, and you build equity presuming the value of the house continues to increase.

One downside to not reaffirming a home is that the mortgage company will not report your payments to the credit bureaus. Your remedy for this is to send a letter once a year to each credit bureau indicating the payments you have made. If the creditor fails to file a response disputing that you made the payments, you will get credit for the payments on your credit reports.

One tremendous upside to not reaffirming a mortgage in Chapter 7 is that if you lose your job, the house value is ‘upside down’ in the future, or for any other reason you wish to walk away from the house (and the debt) you can do so. The lender is limited to receiving the property as their only recourse. They can not pursue you for any remainder debt on the home in the event they sell it for less than what you owe on it.

Your Mortgage In Chapter 13

In Chapter 13, you can also keep your home and mortgage, provided you continue to make payments as usual. Additionally, may clients use Chapter 13 as a way to force the lender to let them catch up on missed payments. Your Chapter 13 plan will propose to pay the normal mortgage amount, plus a small amount each month for the purpose of catching up on missed payments over a 60 month period. When the Chapter 13 bankruptcy closes out after 60 months, your mortgage will be deemed current.

Due to the ability to use Chapter 13 for the purpose of catching up on missed payments, many clients use Chapter 13 to avoid a foreclosure. A Chapter 13 can even be filed as an emergency filing, in order to stop a foreclosure. So long as you make ongoing payments in Chapter 13 under your confirmed Chapter 13 plan, the mortgage lender has no choice but allow the Chapter 13 to move forward. Additionally, you will be obtaining a discharge of unsecured debt in Chapter 13.

Old Mortgage Debt In Bankruptcy

If you have old mortgage debt on your credit, a Chapter 7 or Chapter 13 filing will address that debt and your discharge will include it. If your current mortgage is a burden you can surrender your current real estate to the lender in bankruptcy, and the lender will be limited to the home as repayment of their debt– the bankruptcy filing will prevent them from pursuing you as an individual if the sale of the property leaves a remainder balance on the mortgage debt.

Speak With A Bankruptcy Lawyer Today

If you are facing foreclosure, or would like to consider bankruptcy for another reason, we are here to help. Our clients who own real estate are able to file bankruptcy every day while keeping their home. We can show you how. If you would like a consultation you can call 704.749.7747 to speak with an attorney today. Or you can click HERE to request a consultation. All consultations are free and can be done over the phone. We know you have choices. We hope you choose Layton Law.

 

Inventory and Equipment in Bankruptcy

A common scenario is emerging across the country, and one which we are addressing in our office with many potential bankruptcy clients. As small businesses further feel the impact of Covid-19, business owners are wondering where—if any—the outlet valve is for them, financially.

The Small Business Catch-22

There is a catch-22 in a small business bankruptcy scenario, in that the business may be providing enough money for the owner and their family to operate their personal household, but not enough money to pay the expenses required to keep the business going.

While this scenario may have been somewhat tenable for restaurant owners and other small business owners during the moratorium on foreclosure and eviction, those days are nearly over. As courts re-open in North Carolina, foreclosures, evictions, and creditor lawsuits will move forward. Without an influx of income or some other relief, this will no doubt place business owners in an untenable position.

The business owner wants to continue to operate the business to bring in necessary income to live off of, but they cannot keep up with the mounting debt and invoices.

How Can Bankruptcy Help?

The type of debt you carry will be a key factor in how your small business will be affected by a bankruptcy filing. Second, the value of your business inventory and assets will be a factor. If your business debt is unsecured debt, you may be able to protect your equipment and inventory from creditors in a bankruptcy. Lastly, you can exempt or protect some of your business inventory and equipment in bankruptcy, if it has value above and beyond what is owed to creditors who have liens against it.

Many of our small business clients elect to file Chapter 13 bankruptcy. So long as you pay your creditors the value of your unexempt business inventory and equipment over the life of the Chapter 13, you can operate your business during bankruptcy. As your business recovers and income increases, it is true your Chapter 13 payment may increase, but you always have the option of dropping out of or dismissing your Chapter 13 bankruptcy if you have recovered enough to enable you to pay your bills.

Secured Creditors

If your debt is secured by inventory or equipment, those secured creditors will take priority over other creditors. They will be entitled to either the equipment, or payment up to the value of that equipment. Depending upon whether the secured creditor was a purchase money creditor, or a general line of credit creditor who took a security interest in equipment you already owned, we can advise how that debt and equipment will be treated in a bankruptcy.

Back Rent In Chapter 13

Chapter 13 offers you the ability to stop an eviction by a landlord, if you show you will be able to pay rent going forward, while slowly making up the missed rent in your Chapter 13 payments. Chapter 13 is typically a 60 month plan, so your back rent is paid over that 60 month period while you continue to make your normal rent payments. The length of your lease will be a factor, as well as whether your landlord has already obtained an order in the eviction process. The end of the moratorium on evictions certainly make the likelihood of filing to avoid eviction a reality.

Walking Away From The Business In Bankruptcy

If you are ready to walk away from the business, you may qualify for a Chapter 7 or a Chapter 13. While this means you would most likely file bankruptcy and dissolve the corporate (business) entity, there is nothing to stop you from forming a new company on the heels of bankruptcy and doing business again under a new name.

Speak With A Charlotte Small Business Bankruptcy Lawyer Today

Call today if you have questions about your small business, equipment and inventory in bankruptcy, or other concerns. The consultation is free, and we are here to help. We can be reached at 704.479.7747. Or, you can click HERE to request a free consultation.

Credit Cards To Help Build Credit

If you are looking for credit cards to help build credit, then you are thinking about your future. If your credit is already damaged, you may not be able to obtain a traditional credit card for the purpose of rebuilding your credit. In that case, the easiest way to build credit with a credit card is to obtain a secured credit card.

Secured Credit Cards And Building Credit

With a secured credit card, the user places a security deposit down when opening the account. The bank holds the deposit until the account closes. While this may feel like fictitious credit, remember that your goal is to rebuild your credit.

With a secured credit card, each month you place a few new charges on the card. Then, at the end of the month, you pay them off (or make the minimum payment). So long as you make your payments on time, the issuing bank will report to the credit bureaus for you. Those reported payments appear on your credit report the same way that unsecured card payments appear on your credit report. As a result, as you continue to make on time payments over the course of many months, your credit score builds simultaneously, and the secured credit card helps build your credit. An article by Nerd Wallet lists some of those most popular secured credit cards.

Bankruptcy And Your Credit Score

While it is true that a bankruptcy filing will initially lower your credit score, the individual planning for the future should consider bankruptcy as a way to discharge insurmountable debt. On the heels of your bankruptcy filing, your credit score will begin building again. First, after bankruptcy, you can apply for the secured credit cards mentioned above. Second, your debt to income ratio improves in your favor—even though your income has not increased, your debt has gone down dramatically. Finally, traditional lines of credit begin to open to you within six months after your bankruptcy discharge is entered.

Our clients routinely report to us in the first year after bankruptcy that they receive offers for vehicle financing and credit card offers. At the two year mark following bankruptcy, clients often reach out to us for a copy of bankruptcy paperwork to provide to their mortgage lender. This means that two years after the discharge in bankruptcy is entered, clients are getting approved for a mortgage. This is incredible news.

Bankruptcy And Your Credit Report

While bankruptcy can remain on your credit report for up to ten years. This is true. Most of the credit bureaus remove it after seven years. In any event, what you do with your credit after bankruptcy carries more weight than the bankruptcy remaining on the credit report. Remember, clients are getting mortgages two years after filing bankruptcy. By taking careful steps to build credit post-bankruptcy, you can negate the fact that the bankruptcy remains on your credit report for several years.

Bankruptcy And Credit Cards To Help Build Credit

If you exercise your right to file bankruptcy,  you get the benefit of discharging your unsecured debt. When you combine a Chapter 7 or Chapter 13 filing with active steps to rebuild credit with secured credit cards immediately after filing bankruptcy, you are on your way to achieving your financial goals.

Speak With A Charlotte Bankruptcy Lawyer Today

If you would like to speak with a lawyer about secured credit cards, bankruptcy, or any other aspect of building your credit, please reach out to us at 704.749.7747 or click HERE to request a free phone consultation. We know you have choices. We hope you choose Layton Law.

Bankruptcy and Taxes

If you are considering filing bankruptcy, you may be interested in determining how income taxes are addressed in a bankruptcy filing. In order to determine how bankruptcy affects taxes, you must know the original due date the taxes came due. From there, you will need to know when you filed the tax return related to that tax debt. With an understanding of these two factors, you can determine the treatment of the debt in a Chapter 7 filing and a Chapter 13 filing.

The Taxes Must Be Three Years Old

Your tax obligation comes due on the date the taxes are due. For example, the taxes due for calendar year 2016 did not come due until April 15th, 2017. That tax debt turns three years old on April 15th, 2020. If you file your bankruptcy prior to April 15th, 2020, the debt will still have priority status. This means in a Chapter 7 the tax debt will survive the bankruptcy. In a Chapter 13, the debt will be paid  in full through your 60 month Chapter 13 plan.

If you file your bankruptcy after April 15th, 2020, the debt loses its status and is lumped in with other general unsecured debts in a Chapter 7 or Chapter 13 filing. In a Chapter 7, this means the debt is discharged in full. In a Chapter 13, a percentage of the debt will be paid just like the remainder of unsecured creditors receive a percentage of their debt through the Chapter 13 plan. Many Chapter 13 plans are set to pay 5 or 10 percent to unsecured creditors, or even less. This can be a tremendous advantage for individuals with heavy tax burdens who are considering bankruptcy. (If you want to read more about Chapter 13 payments, we wrote about them HERE).

Your Tax Return Must Be Filed

If your tax debt is more than three years old, there is a chance it qualifies to be treated as unsecured debt, as discussed above. However, there are a few additional requirements. One of those is that the tax returns related to that tax debt must have been filed at least two years prior to the bankruptcy filing. If you failed to file your own return and the taxing authority filed a “forced return” on your behalf, unfortunately even if that forced filing is more than two years old, it will not qualify for this requirement.

The 240 Day Rule

One last requirement is that the taxing authority must have assessed the tax debt at least 240 years prior to the filing. For example, consider a scenario where you file taxes April 15th of 2017 and owe $5,000.00. That tax debt turns three years old April 15th of 2020. However, if the IRS audits you for 2017 and assesses an additional $10,000 of debt for the 2017 tax year, you will need to wait at least 240 days from the date of the assessment of new taxes in order to have that debt discharged in bankruptcy.

Confused? Don’t Be!

We are here to help. We assess tax debt on a regular basis in our office and you will have confidence about the treatment of your tax debt prior to your bankruptcy filing. If you would like to schedule a consultation you can call us at 704.749.7747 or click HERE to request one. All consultations are free, and you deserve to understand your options regarding bankruptcy and taxes. When it comes to choosing a law firm, we know you have options. We hope you choose Layton Law.

Bankruptcy Is Not A Four Letter Word

Currently, both bankruptcy and Covid-19 are spreading quickly. As we begin to see Fortune 500 companies file for bankruptcy due to Covid-19, it is a great time to remind ourselves that bankruptcy can be viewed as a business decision. In fact, filing bankruptcy is what saves many companies and enables them to thrive in the market post-bankruptcy. It is too early to tell whether companies filing bankruptcy now will bounce back; however, historically we do know that companies like Apple, General Motors, and Hostess all successfully bounced back with the help of a bankruptcy filing.

There are also famous individuals who filed bankruptcy and went on to great success. This was long before bankruptcy and Covid-19, but among them are Walt Disney, Donald Trump, and Abraham Lincoln. These individuals understood that bankruptcy is not  a four letter word. If anything it is more akin to a seven letter word: F-R-E-E-D-O-M. The day you file bankruptcy is the day you play your ace card against oppressive creditors and accumulating debt.

Bankruptcy Is The First Step To Recovery

One common concern regarding a bankruptcy filing is how long it will take you to bounce back from bankruptcy. Truthfully, it is the bankruptcy filing that is the first step in recovery for a business or individual. The bankruptcy filing brushes back creditors and forces them into a plan the company can manage while they continue to conduct business. The same is true of a personal bankruptcy filing.

From the day you file bankruptcy, you get relief from creditors. They are no longer allowed to pursue you for collection of debts, or legal actions against you related to debt. As a result, you can finally breathe again. Your income is no longer being shoveled to creditors whose balances do not seem to move despite significant payments each month. Instead, you can use those funds to pay for the needs of yourself and your family. If you file a Chapter 7 bankruptcy, you will receive a discharge of your debts. If you file a Chapter 13 bankruptcy, you will enter into a re-payment plan which quite often requires you to pay less than 10% to your creditors spread out over a five year period.

As one of our favorite clients said in a recent review of the firm “Chapter 7 and Chapter 13 are just that: Chapters. They are not the entire book!”

Treat It Like A Business Decision

You can choose to view a bankruptcy filing as a business decision—or at least a financial one—for you and your family. Smart business owners put their emotions aside and do what has to be done for the health of the company. Most of our clients realize that bankruptcy is not an emotional experience; however, they do confess that it was their emotions that kept them from filing sooner. Unfortunately, this means months or years of payments to creditors on debts which are ultimately discharged in bankruptcy. If you act quickly, you can avoid spending any additional money on unsecured debt which will be addressed with one bankruptcy fee and one bankruptcy filing.

The bankruptcy court has remained open despite Covid-19, allowing debtors to move forward with their financial recoveries. Most hearings are done over the telephone at this time, which is a great convenience for all parties and a wonderful solution as the courts are busier each month with bankruptcy filings.

Take The Next Step

The next step is simple. Call us to speak with an attorney. The call is free and you deserve to understand your options. We can be reached at 704.749.7747. We are happy to answer questions about bankruptcy and Covid-19. Or, you can click HERE to request a consultation by filling out a very short form.

Watch A Short Video

If you’d like to know a little more about the firm, watch this short one minute Introductory Video by Chris Layton. We know you have choices. We hope you choose Layton Law.

Small Business Bankruptcy

Filing a small business bankruptcy in North Carolina will relieve you of your personal obligations on business debt. Your business entity will still be liable for the debt. As a result, for most small businesses, a Chapter 7 or Chapter 13 combined with a dissolution of the corporate entity, will accomplish your goal of eliminating both personal liability and business liability. After bankruptcy, most small business bankruptcy clients are able to start a new small business under a different name.

Despite what you’ve read about filing business bankruptcy under Chapter 11, our clients often accomplish the same result through a personal bankruptcy by filing a Chapter 7 or Chapter 13 bankruptcy, and dissolving the small business. This saves you thousands of dollars and you are rewarded with the same result– you are free from your obligation under the small business debt.

Personal Liability In Small Business Bankruptcy

When most small business owners take on business debt, they sign as an officer or member of the small business, and then again personally. This guarantees the lender that either the business or the individual will repay the debt. This is why simply dissolving the business will not eliminate the debt from your life—you’re still on the hook personally. This means creditors for the business can come after your personal assets: home, vehicles, savings, etc.

Business Assets and Liabilities

When you file a personal bankruptcy and include business debt, you’ll also need to provide income and loss statements for the business for the year prior to filing. Your Charlotte bankruptcy attorney can assist you with putting these together, if an accountant has not already done so. You’ll also need to list all assets and debts of the business.

Dissolving The Company

Dissolving an LLC or other small business entity eliminates the potential for creditors to pursue the company for debt—the company no longer exists. If you file a personal bankruptcy in combination with the dissolution, you relieve your personal liability. In essence, you’ve filed a small business bankruptcy by filing personally. If there are assets of the company which need to be addressed, our firm can assist with contacting creditors in compliance with The North Carolina Business Corporation Act.

Starting Another Business

Filing a small business bankruptcy does not prevent you from starting a new business. You’ll be subject to the same approval process if you need to take on debt to get the business started, and your personal bankruptcy may be a hurdle from a credit perspective. But entrepreneurs are creative and often find funding outside of traditional means to get new businesses started.

Call today if you have questions about your small business, small business bankruptcy or personal bankruptcy. The consultation is free, and we’re here to help. We can be reached at 704.479.7747. Or, you can click HERE to request a free consultation.

What Happens To My Car In Bankruptcy?

If you own a car or lease a car, you will need to decide what happens to your car in bankruptcy. You have the choice to keep your car and the debt associated with it, or you can choose to surrender the car in bankruptcy. This means the car goes back to the lender, and the debt goes with it. There are one or two exceptions, which we will address. In summary, you can either keep the car and the debt, or ‘get rid of’ the car and get rid of (discharge) the debt.

How Can I Keep My Car In Bankruptcy?

If you want to keep the car in a Chapter 7, you will need to be current on payments by the date of your 341 meeting. You will sign a Reaffirmation Agreement with the lender, which will contain the same terms you had prior to the bankruptcy. The reason for the agreement is the filing of your bankruptcy technically relieves you of the obligation to repay the loan; however, if you want to keep the car, you will need to renew the agreement. The Reaffirmation Agreement accomplishes that.

If you want to keep your car in Chapter 13, you can do so. Your interest rate may decrease due to the interest rate set by the bankruptcy court. Additionally, if you have had the vehicle for more than 910 days, you may be able to lower the balance on the loan in Chapter 13, which can be a tremendous benefit.

How Do I Surrender My Car In Bankruptcy?

If you want to surrender the car and the debt, it is easy. We file your bankruptcy and reach out to the car lender to make arrangements for them to pick up the car or have you drop off the car in the alternative.

You Have Options

The upside to addressing a car in bankruptcy is that you have options. Most clients are incredibly happy with the results of bankruptcy including the ability to have flexibility regarding vehicles. The rules of bankruptcy heavily favor the debtor—the person filing—and as a result, if you would like to keep a vehicle while discharging all unsecured debt, it is almost always an option.

Speak With A Bankruptcy Lawyer Today

If you would like to speak with us about what happens to your car in bankruptcy, you can request a free consultation. Just call 704.749.7747 or click HERE to request a time to talk. If you would like to watch a short video from Chris Layton, it may help you make a decision regarding working with us. We know you have choices. We hope you choose Layton Law.