Chapter 13 Bankruptcy Blog

Posts containing useful information about Chapter 13 for anyone considering a North Carolina bankruptcy lawyer.

How Does Unemployment Affect Bankruptcy?

Many individuals are currently seeking advice regarding unemployment and bankruptcy. Prior to filing bankruptcy, when individuals are fighting off creditors, there are often questions as to whether unemployment can be garnished. We answered those questions in a previous post and the news is mostly good news. However, if you are tired of fending off creditors and want a permanent solution to cash flow, a Chapter 7 or Chapter 13 bankruptcy may be the answer.

Can I Qualify For Bankruptcy If I Receive Unemployment?

Yes. When qualifying for bankruptcy, the Chapter 7 court looks at your income for the 6-month period prior to your bankruptcy filing date. If your income is lower than the Median Income for a household of your size, you can qualify automatically for bankruptcy. Below you will find totals for household size, monthly income, and annual income:

HOUSEHOLD SIZE                             MONTHLY INCOME                         ANNUAL INCOME

1                                                                  $3,992.00                                             $47,904.00

2                                                                 $5,078.83                                             $60,946.00

3                                                                 $5,660.92                                             $67,931.00

4                                                                 $7162.33                                              $85,948.00

 

Remember, the bankruptcy court is looking at the most recent 6 months of income. If you have been collecting unemployment, chances are you are well below these totals. Even if your income or your combined household income exceeds these totals, you may still pass The Means Test in bankruptcy. The Means Test looks at your overall income vs. your overall ongoing expenses. It represents an equitable approach to providing bankruptcy relief for those who make more than the Median Income, yet who still deserve debt relief.

Do Stimulus Funds Hurt My Bankruptcy Filing?

If you have received stimulus funds from the federal or state government related to the Coronavirus, the funds will not be counted as income for the purposes of determining whether you qualify for Chapter 7. However, those funds are part of the Bankruptcy Estate. This means that if you still have some of your stimulus funds on hand when you file bankruptcy, you will need to exempt them or risk losing them to the court. In most cases, the funds can be exempted, and your bankruptcy lawyer will explain how this works.

Do Stimulus Funds and Unemployment Affect Bankruptcy In Chapter 13?

Unfortunately, if you are receiving unemployment income only, it may not be enough to show that you qualify for Chapter 13. If you are considering a Chapter 13 for the purpose of getting current on a mortgage or car loan, your incoming monthly unemployment will have to exceed your monthly expenses in order to successfully enter Chapter 13. Additionally, while the stimulus funds are helpful to your budget, they can not be factored in when considering your anticipated ongoing disposable income in a Chapter 13 filing. Again, these concerns are only for a Chapter 13.

Speak With A Charlotte Bankruptcy Lawyer Today

Getting started with bankruptcy planning is easy. We are happy to discuss further with you how unemployment can affect bankruptcy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.

 

Emergency Bankruptcy To Stop Foreclosure

Yes, you can file an emergency bankruptcy to stop a foreclosure. If you’re behind on your mortgage and your mortgage lender is about to sell your home in foreclosure, a Chapter 13 bankruptcy filing will freeze the foreclosure proceeding. Then, as long as you make your Chapter 13 payments as scheduled, your Chapter 13 plan will allow you to get caught up on the mortgage over the Plan period (typically 60 months).

What If The Sale Already Took Place?

In North Carolina, after a foreclosure sale, you have ten days within which you can file a bankruptcy to stop the foreclosure. If you have a court paper showing a sale date of January 1st, you would have 10 days after that date to file your Chapter 13 bankruptcy. Weekends and holidays are included in the 10 days, and if your 10th day falls on a weekend or holiday, you have until the next business day to file your Chapter 13.

Will My Mortgage Lender Object To The Bankruptcy?

Most mortgage lenders have no objection to a Chapter 13 bankruptcy. After all, it’s a court-approved plan to get caught up on the mortgage. The mortgage lender will file documents with the court laying out the balance owed on the mortgage and the amount you are behind (The “Arrears”). Your Chapter 13 bankruptcy lawyer will calculate your plan payments for you based on these figures as well as your monthly income and expense figures.

Even if the mortgage lender does object to the Chapter 13, there objection will not survive provided your Chapter 13 plan proposes to pay the normal monthly mortgage payment each month and make up the arrears over the course of the plan.

How Quickly Can I File An Emergency Bankruptcy?

Whether it’s a Chapter 7 or a Chapter 13, an emergency bankruptcy can be filed very quickly. You’ll need to take the mandatory online course required by the statute (it takes an hour), and you’ll need to meet with our firm to sign your bankruptcy petition prior to signing.

When you file an emergency bankruptcy to stop foreclosure, providing the court with the required documentation is very important. Typically, our firm will prepare for quite some time with a client before filing their bankruptcy. When we file an emergency bankruptcy, we have fourteen days to provide the court with the remainder of the information required for a successful bankruptcy. So, getting it filed is the first step, but be prepared to work quickly together to fulfill the remainder of the court’s requirements.

How Do I Get Started?

Getting started with an emergency bankruptcy to stop foreclosure is easy. You can call us at 704.749.7747 for a free consultation or click HERE to request a phone call. A lawyer will call you today.

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.

How Much Will My Chapter 13 Payments Be?

Determining how much your Chapter 13 payments will be is a complicated process that involves several components. Your bankruptcy attorney will gather numerous pieces of information from you in order to accurately propose a Chapter 13 plan to the court. If approved, your Chapter 13 payment will be set by an Order confirming the plan.

Your Payment Starts With Your Ability To Pay

Chapter 13 is distinguishable from Chapter 7 in that when you file Chapter 13 you are being asked to pay something back to your creditors over a 3 or 5 year period. If your current monthly income is greater than the applicable state median, you will have a 5-year plan. Most plans are 5 years. The burning question is HOW MUCH do I have to pay my creditors?

One premise of Chapter 13 is that the debtor must pay creditors whatever amount they are able to pay. More specifically, after the debtor takes their monthly income and subtracts all ongoing monthly expenses, the remainder is known as Net Disposable Income. This is the amount you should commit to creditors in your Chapter 13 plan. Your bankruptcy attorney will work with you to make sure you’ve taken all allowable expenses and deductions against income. This serves to lower the Net Disposable Income and in turn lowers the portion of your Chapter 13 payment going to unsecured creditors.

Items Which May Increase Your Chapter 13 Payment

Once you have calculated your Net Disposable Income, you have determined the floor or the lowest amount you can propose to repay to creditors. However, you must also consider assets and certain other priority debts, in order to complete the analysis. A debtor is only allowed a certain dollar amount of equity in particular assets (Home, Vehicle, etc.). If the debtor’s equity exceeds the allowable amount, then the debtor must propose a plan which accounts for that amount. The allowable amount of equity in the property is excluded from the bankruptcy estate by claiming your bankruptcy exemptions.

Example: Debtor owns a home worth $200,000.00. The debtor’s mortgage balance at the time of filing is $160,000.00. The debtor has $40,000.00 of equity. The allowable Homestead Exemption in North Carolina is $35,000.00. In this case, the debtor exceeds the allowable exemption by $5,000.00. As a result, the debtor must propose a plan that pays at least that amount to unsecured creditors, spread out over the 5 year plan period. $5,000.00/60 months = $83/mo. If the debtor’s Net Disposable Income is already $83/mo or higher, no adjustments need to be made. However, if Net Disposable Income is only $53/mo, the debtor would have to increase it to $83/mo.

In this instance, the ‘floor’ set by Net Disposable Income may need to be raised to accommodate the excess equity in the home. Below is an example where the debtor has a priority debt that must be paid in full. This can also affect the minimum monthly plan payment. Priority debts include but are not limited to: back child support owed, IRS debt less than 3 years old, NC Department of Revenue debt less than 3 years old, back property taxes owed, HOA dues owed at the time of filing.) The answer to the question “How much will my chapter 13 payments be” changes, depending upon the factors below.

Example: Example: Debtor has Net Disposable Income of $100/mo. However, the debtor also owes the IRS $5,000 from taxes less than 3 years old at the time of filing. As such, those taxes are priority debt and must be paid in full over the life of the plan. For a 5 year plan, the monthly payment on the IRS debt would come to roughly $83/mo. As the debtor already has Net Disposable Income exceeding $83/mo, the plan is fine at $100/mo. The bankruptcy trustee will send roughly $83/mo to the IRS and the remaining $17/mo to the unsecured creditors.

In a situation where the debtor has BOTH excess equities in property AND priority debt, you must apply both rules. The minimum monthly payment proposed must be enough to pay a) the excess equity over 5 years, AND in addition, must include enough money to pay the priority debt.

Example: Combining both examples above, the debtor has $5,000 in excess equity and an additional $5,000 in priority debt. As such, the plan must pay a total of $10,000 over the 5 year period. $10,000/60 months = $166/mo. As a result, no matter the Net Disposable Income of the debtor, it would be inappropriate to propose a monthly plan payment of less than $166/mo.

Other Factors Which Affect A Chapter 13 Plan Calculation

Vehicle Loan Balance–Typically, the balance on your vehicle loan will be scheduled to be paid evenly over the 60 month plan period. If you only have 2 years remaining on your vehicle when you file Chapter 13, this will result in a decrease in your car payment (spreading it out over 5 years instead of 2) which will help to absorb some of the potential increases discussed above.

Age Of Vehicle Loan–If your vehicle loan is older than 910 days at the time of filing, you can reduce the balance of the loan down to the Fair Market Value of the vehicle, and pay that entire balance over the 60 month plan period. This often results in a substantial “win” for the debtor and can make a Chapter 13 plan feasible.

Remaining Attorney Payments–The Western District of North Carolina sets the base fee for attorneys in Chapter 13 at $4,500 as of the writing of this article. If you pay your attorney $4,500 prior to filing, you will not have any attorney payments built into your payment. However, this is not an option for most clients. Supposing instead you pay $3,500 to your attorney prior to filing, this would leave $1,000 to be paid throughout the 60 month plan period.

Speak With A Personal Injury Lawyer Today

If you would like to speak with an attorney about your personal injury case, we’re here to help. 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 Personal Injury 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.

How Is A Chapter 13 Plan Calculation Performed?

A Chapter 13 plan calculation is based on two premises: your budget (ability to pay), and your mandatory repayments.

The Chapter 13 Budget

One premise behind Chapter 13 is that you must pay all disposable income to your creditors. This is known as your ability to pay. As such, you must show the court your ability to pay in the paperwork you file. You and your bankruptcy attorney will propose a budget to the court. The budget will be laid out in your filing as Schedule I (Income) and Schedule J (Expenses). Any ‘left over’ money in your budget must be committed to your unsecured creditors each month as Net Disposable Income.

When calculating the budget, your mortgage and vehicle payment are accounted for, together with all other ordinary and ongoing income and expenses. While the budget is not exact, you must use good faith efforts to disclose your anticipated ongoing income and expenses. The items you do not put into your budget are the ongoing debt payments to creditors—those are being removed as part of the relief offered by Chapter 13. Again, your Net Disposable Income (Sample of Net Disposable Income form) will be assigned to those creditors each month. If your plan is approve, they are required to accept those amounts as payment.

Chapter 13 Budget Example

A very simplified Chapter 13 budget example would be as follows:

Gross Monthly Income – $4,000.00

Monthly Expenses –  $3,890 (Taxes $900, Mortgage $1,600, Vehicle $340, Food $600, Utilities $375, Home Maintenance $150, HOA $150, Hobbies/Entertainment $150, Health Insurance $450, Misc. $75)

Net Disposable Income – $110

In the example above, your Net Disposable Income (Income minus Expenses) is $110. You would need to commit $110 per month to your Chapter 13 creditors as part of your Chapter 13 plan calculation.

Mandatory Chapter 13 Payments

While your budget shows your ability to pay creditors, there are also mandatory payments which must be considered when calculating your Chapter 13 payment. In the example above, the debtor is keeping their home and vehicle. Both of those items have payments. As such, those payments are built into the calculation.

Suppose the debtor also owed the IRS $2,000. If that debt is from taxes which are less than 3 years old at the time of filing, that is a mandatory payment which must be paid in full over the life of the plan. When divided over a 60 month plan, the $2,000 debt comes to roughly $33 per month. As such, the $110 does not change for the debtor; however, $33 of that $110 each month will go to the IRS. This is an example of how the ability to pay works in tandem with mandatory payments.

Other examples of mandatory payments include: attorney fees, filing fees, mortgage arrears, vehicle arrears, child support, state taxes owed.

What If Mandatory Payments Exceed Net Disposable Income?

If your budget is very tight and you have a large mandatory payment which must be paid in full during your plan, you must show the court that despite the calculations, your plan is still feasible. Taking the example above, if the debtor owed the IRS $10,000, this would amount to a $166/month payment to the IRS; however, the debtor already established they only have $110 available for Chapter 13. Without further explanation, the trustee would object to the proposed plan because it is not ‘feasible’ given the debtor’s current budget.

One way to overcome feasibility objections in a Chapter 13 plan calculation is to provide an explanation to the court in your filing, showing the court why you believe you will be able to make the payments. It could be that you have a family member who has told you they will help out. Or, perhaps you expect your income to increase slightly in the near future. Perhaps a certain monthly expense is about to be removed from your budget. Any one or all of those things will start a conversation with the trustee about the feasibility of your plan.

Our experience has been that the easiest way to overcome a feasibility objection is to make your payments on time. In other words, when your attorney files your Chapter 13 case, you should make a full payment as quickly as possible. This way, when you attend your 341 hearing, the court will see that you’ve already demonstrated your ability to pay by making a payment on time. This, together with an explanation as to why you think ongoing payments are feasible, will most likely appease the court.

Additional Items Making Up The Chapter 13 Payment

If you still owe your attorney fees, those will be treated as a mandatory fee and will be calculated as the IRS payment was calculated above. Additionally, the trustee’s office charges a 4% fee for every dollar that flows through the plan. Therefore, if your mortgage is $1,000 and you have a budget of $100 Net Disposable Income, you will have a trustee fee of $44 added to the payment. Your bankruptcy attorney will account for this in the calculations—it will not be an additional fee.

If you own property, you must determine the equity in the property. The bankruptcy court allows you to keep a certain amount of equity in property, and these allowances are known as Exemptions. If your equity exceeds the allowable exemptions, you must propose a plan which pays at least that excess amount to the unsecured creditors, over the course of the plan. Your bankruptcy attorney will make sure your plan meets this test.

Gaining Perspective Regarding Your Chapter 13 Payment

Keep in mind, you may be discouraged about paying a trustee fee, or committing $100 a month to unsecured creditors; however, when you look at the full picture, Chapter 13 typically offers debtors a very enticing deal. In exchange for paying a very small payment to unsecured creditors each month, the remainder of the debt will be discharged. In the example above, if the debtor has $50,000 of unsecured debt, the Chapter 13 plan will allow them to receive a discharge of that debt in exchange for roughly $6,300 spread out over 60 months.

Speak With A Charlotte Bankruptcy Attorney Today

If you have not already, speak with a Charlotte bankruptcy attorney today. We can be reached at 704.749.7747 and we’re happy to help you understand the options. You can also request a FREE CONSULTATION and we will be in touch soon.

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.

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.