Charlotte Bankruptcy Blog

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

When To File Bankruptcy Chapter 13

Deciding when to file a Chapter 13 bankruptcy should be done with the assistance of your bankruptcy attorney. First, clients must decide whether a Chapter 7 or a Chapter 13 is the best fit for them. Our office gathers information from you over the telephone in order to initially decide this. The analysis is based on your income, your assets, and your debt.

Chapter 7 Is Not Always The Best Option

There are times when a client will have the choice between a Chapter 7 and a Chapter 13 bankruptcy, yet still, choose Chapter 13. In Chapter 7, if you have assets that can not be exempt, the bankruptcy trustee may attempt to sell those assets. Vehicles and homes are two primary examples of such assets. Alternatively, a Chapter 13 trustee will not try to sell your assets. Instead, your payment in Chapter 13 is a function of the equity in those assets.

You may also have transferred to friends or family which could prevent the successful filing of Chapter 7; however, those transfers are treated differently in Chapter 13 and you can still receive your discharge. If a transfer is characterized as a gift or a preference, it may change your monthly Chapter 13 payment. This change is usually insignificant over a five-year repayment plan in Chapter 13.

Once you decide that Chapter 13 is the right option for you, we will help you decide WHEN to file your Chapter 13 bankruptcy.

The Timing Of Your Chapter 13 Filing

There are some instances where the timing of your bankruptcy filing is determined by outside forces. If you are facing a foreclosure, you will need to file prior to the finalization of the foreclosure sale. This filing will halt the foreclosure and allow you to “catch up” on the mortgage during the five-year repayment plan in bankruptcy. Additionally, if a creditor is pursuing a judgment against you, filing prior to the entry of judgment (whenever possible) makes for a smoother filling. In any case, the bankruptcy will address the judgment and the underlying debt.

Tax Debt In Chapter 13

Depending upon the age of your tax debt, it may be advisable to wait a few months or even longer to file your Chapter 13. The difference could mean paying back thousands of dollars vs. paying pennies on the dollar. The rules regarding tax debt and how it is addressed in bankruptcy are complex, but our office will help you sort through the considerations. In any case, Chapter 13 will address all of your tax debt by either treating it as unsecured debt or putting you on a repayment schedule during the five-year repayment time frame.

Vehicle Debt In Chapter 13

Another consideration regarding the filing of your Chapter 13 relates to the age of your automobile debt. If you have a car with a loan balance, we will ask you how long you have been paying on the loan. Depending upon the age of the loan, you may be entitled to reduce the loan balance—and typically the interest rate—by way of your bankruptcy filing. This can produce amazing savings and turn a vehicle into a great asset at the end of Chapter 13 when you receive your discharge.

Speak With A Charlotte Bankruptcy Lawyer Today

Considering filing a Chapter 13? Stop reading a call us. In a few minutes, we can answer your questions, provide peace of mind, and help put together a game plan for addressing your concerns and moving forward. You can reach us at 704.749.7747 or click HERE to request a consultation and an attorney will call you today.


Bankruptcy For Medical Bills

You can file bankruptcy for medical bills. Not only will your medical bills be discharged by the bankruptcy, but your other existing unsecured debt will be discharged by filing bankruptcy as well. While this is sometimes referred to as a Medical Bankruptcy, there is no specific legal term for this. It simply signifies that the primary reason you are filing bankruptcy is due to your medical bills.

Your Medical Bills Must Be At Least 90 Days Old

At the time of your bankruptcy filing, your medical bills must be at least 90 days old. This refers to the date of service which gave rise to the medical bills. If the bills are less than 90 days old at the time of the filing, the medical creditor can assert their rights through the bankruptcy by filing an objection to discharge, or in the alternative, that their bill should survive the bankruptcy. Because of this, we often discuss health concerns with our clients who want to file bankruptcy due to medical bills. If you have an upcoming surgery or large medical expense, we may choose to strategically wait to file your case until after the date of service is more than 90 days old.

Medical Bills Due To Personal Injury

North Carolina can be a challenging state when it comes to medical bills in a personal injury claim. Many times, a personal injury settlement will not address one hundred percent of your medical bills. This means you find that you have settled your personal injury claim for as much money as you can, yet you have remaining medical billing related to the injury. Filing bankruptcy for medical bills will address the remaining medical billing associated with your personal injury.

Assets And Income Still Matter

As with any bankruptcy, if you file bankruptcy for medical bills, you still need to pass the income and assets test in order to file a Chapter 7. Our office will work hand in hand with you to determine if you can file a Chapter 7. In the alternative, Chapter 13 is almost always an option.

Alternatives To Filing Bankruptcy

Often, our firm represents clients in debt settlement or debt negotiations. It may be that the client can not file bankruptcy or does not want to file bankruptcy. In any case, as a bankruptcy firm, we hold special leverage against creditors in the negotiation process. Often, this leads to a great result for the client.

Speak With A Charlotte Bankruptcy Lawyer Today

If you have questions about whether bankruptcy clears the debt, we are here to help. Call 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.



Does Bankruptcy Clear All Debt?

Bankruptcy clears unsecured debt, and may clear all debt depending upon your circumstances, and which Chapter of bankruptcy you file. The goal in most bankruptcy filings is to receive a discharge of debt. This article addresses the primary categories of debt and how they are addressed in bankruptcy.

Secured Debt In Bankruptcy

Secured debt is debt secured by property. Vehicle loans and mortgages are the primary examples. The general rule is if you keep the property, you keep the debt. You can also surrender the property to the lender, in exchange for discharge of the debt.

As a result, secured debt can be cleared or discharged in bankruptcy, depending upon whether you choose to keep the property. Many clients with a vehicle worth $5,000.00 come to bankruptcy with a vehicle loan balance far exceeding the value of the vehicle. In that instance, the client may choose to surrender the property in exchange for discharge of the debt.

If you choose to keep the property, you may sign a reaffirmation agreement. The reason for this is the filing of the bankruptcy severs the contractual agreement between you and the lender. If you wish to keep the property, the lender may require a reaffirmation agreement. There are some instances in which we will recommend you not file a reaffirmation agreement—we can discuss those specific instances with you if you schedule a consultation.

Unsecured Debt In Bankruptcy

Unsecured debt comes in a few sizes. General unsecured debt includes credit card debt, medical bills, and other debt not secured by property. General unsecured debt is discharged in bankruptcy, and usually provides the greatest relief for debtors who choose to file.

Priority Unsecured Debt

Some debt is unsecured, but is classified as priority debt. Tax debt is an example. The rules regarding which tax debt is discharged in bankruptcy have a few twists and turns and you can reach more about those rules on our blog HERE.

Spousal and child support are also unsecured debt, but treated as priority debt. Spousal support and child support are not discharged in bankruptcy.

Criminal fines and balances on government over-payment of benefits are also priority unsecured debt, not discharged in bankruptcy.


Whether a judgment will be discharged depends upon how much equity you may have in real estate. The filing of the bankruptcy discharges the debt as to you, the person. If you are a real property owner who falls within the rules regarding home equity, a motion can be filed by your bankruptcy attorney for Lien Avoidance. This will make the judgment a non-issue for you moving forward.

An exception to the treatment of a judgment described above would be a judgment obtained as a result of criminal activity such as driving under the influence of alcohol.

Sales and Use Tax

While most income taxes older than 3 years old are discharged in bankruptcy, Sales and Use tax is an exception.

Speak With A Lawyer Today

If you have questions about whether bankruptcy clears debt, we are here to help. Call 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.

Can A Lawyer Help With Debt Settlement?

Yes, a lawyer can help with debt settlement. A legitimate question is whether you need to use a lawyer to assist with your debt settlement. Due to the legal complexities surrounding debt, and the various ways in which a debt can be settled, your choice to use a lawyer to help you with your debt settlement is a meaningful choice.

While settling the debt is your primary concern, you also need to be aware of the different remedies creditors have for collecting upon their debt. Remember, there are different types of debt. Depending upon whether your debt is secured debt or unsecured debt, your creditor may propose differing settlement options with different results.

Unsecured Debt Settlement

If you have unsecured debt, your creditor’s only remedy is to pursue you personally. A well-known example is credit card debt. While you owe the debt, if you stop paying, your creditor will simply continue to nag you for payment while threatening to take legal action to procure payment.

While your continued non-payment will result in negative credit reporting, the creditor is generally limited to attempting to collect the debt from you personally. That being said, keep in the mind the creditor can take steps to take their debt to judgment. If a creditor obtains a judgment against you, their available remedies expand dramatically. These remedies for judgment execution may include utilizing the sheriff’s office to try to collect on their judgment. If you receive a Writ of Execution or a Notice Of Right To Claim Exemptions, your creditor is pursuing your assets in an attempt to collect on their judgment.

Secured Debt

If your debt is secured, your creditor has different remedies available to them as compared to unsecured debt. Secured debt is a debt that is secured by ownership of property. Generally, this means that in exchange for the credit that was extended to you, you pledged property as collateral. A lender is more inclined to loan larger amounts if the debt is secured because they know that if you stop making payments, they can take steps to seize the property. This seizure may come in the way of foreclosure on real estate, repossession of a vehicle, or other seizure of property—depending upon what was pledged.

If the creditor seizes the secured property and sells it, they may come up with a shortfall to pay off the balance of the account. In that event, the creditor can continue to pursue you as an unsecured creditor, in an attempt to obtain the remaining balance.

The Effect Of A Judgment

As mentioned above, a judgment gives an unsecured creditor some of the power that a secured creditor has. For example, if you own real property and a creditor obtains a judgment against you, that unsecured debt will now attach to the real property by way of the judgment. This means that if you sell the real property, the judgment will need to be paid as part of the sale.

Settling Debt With A Lawyer

Given the complexities of debt, there are natural complexities to debt settlement. It is important to understand whether the debt being settled is being released as to a particular piece of property, or satisfied in full. The difference in the language of the debt settlement agreement will dictate the value you are receiving, and whether you want to accept the debt settlement being offered. By way of a simple example, assume a creditor has a judgment against you for $100,000.00 and you want to sell your home. If the creditor is willing to accept $10,000.00 to release the lien from the home so you can sell it, this does not mean that the creditor is prohibited from pursuing the debt outside of the sale transaction. It simply means the house can be sold without paying the debt.

The goal with debt settlement is to reach an agreement that cancels the debt in full—this way, you can move forward in life without fear that this debt will somehow interfere with your financial well-being moving forward. While our firm negotiates debt settlement in all shapes and sizes, the most important aspect is knowing what you are receiving in exchange for your debt settlement payment.

Speak With A Debt Settlement Lawyer Today

Our firm routinely settles the debt for clients who have not been successful in attempting to settle the debt on their own. Using a lawyer can help tremendously with debt settlement. If you would like to speak with a debt settlement lawyer today about your options, we are here to help. Call us at 704.749.7747 or click HERE to request to speak with a lawyer today. We know you have choices. We hope you choose Layton Law.

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 In North Carolina?

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 estates 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 negotiations, 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 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 a NC resident and 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 that 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 is 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 remaining 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, many 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 to allow 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 remaining 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 homes. 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 an 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.