Tag Archive for: Charlotte Bankruptcy

Does My Spouse Have To File Bankruptcy With Me?

No, your spouse does not have to file bankruptcy with you. Whether you file individually or together will be a function of your income, assets, and debts. Our office will assist you with the decision-making process and weighing the pros and cons of a joint bankruptcy filing or an individual bankruptcy filing.

While it may make sense for both spouses to file bankruptcy, a qualified Charlotte bankruptcy lawyer will walk you through the options that suit your particular situation best. Typically, married couples hold debt in many different ways, so it makes sense to analyze the specifics of your situation before making a choice. Filing jointly may provide more debt relief, but there are other concerns to consider.

Let’s Talk Debts

If you and your spouse have separate debts, you may consider filing individually. When you file without your spouse, your debt is discharged, and your spouse’s debt survives the bankruptcy. If you have joint debt and one spouse files, the debt as to the filing spouse is discharged. However, it is important to note the non-filing spouse will still owe the entire balance on the debt. For this reason, many married couples choose to file a joint bankruptcy.

My Spouse’s Credit

One reason to file individually is to preserve the credit of one spouse. In cases where spouses do not hold debt jointly, this is typically a clear option. The filing spouse receives a discharge for the debt in his name, and the non-filing spouse retains her good credit, along with her debts.

North Carolina is not a Community Property state, so even where a married couple holds joint debt, if the non-filing spouse keeps payments current on her debt, her credit score will not be affected.

Does Income Matter?

Income plays a role in whether you have the option to file a joint Chapter 7, and income plays a role in the calculation of your monthly payment in a Chapter 13 bankruptcy filing. When both spouses file, all household income is included in the monthly budget. This affects your Means Test in Chapter 7, and your disposable income in Chapter 13. It is worth noting that all household expenses are also included in those calculations. The goal is to give the court an accurate picture of the household’s financial situation.

When considering whether one spouse should or should not file, income may play a strategic role. Even if one spouse is not filing, both spousal incomes must be included in the income column of the bankruptcy filing. However, any income the non-filing spouse spends on herself (i.e., does not contribute to the ‘household expenses’) can be deducted from this total. For example, if one spouse makes $7,000.00 per month, but gives $1,000.00 a month to help her parents, and contributes another $700.00 per month to a 401k plan, those items are subtracted out from the income totals. Once our office runs hypothetical calculations under both scenarios, the difference often helps dictate the filing strategy.

Ownership Of Assets

The rules of bankruptcy are unique. They do not always make sense, but they are generally predictable. Our firm is familiar with the court’s treatment of asset ownership in both Chapter 7 and Chapter 13. We will ask you who currently owns each family asset and whether those assets have been transferred recently. Quite often, we drive a vehicle believing it to be “our” vehicle, even though it may be titled in our spouse’s name. The same may be true of a home owned by a married couple. Determining who is on the deed to the property is of utmost importance in applying the bankruptcy asset rules to your case.

Many assets in a household are not titled. Generally, ownership of household assets is assumed to be owned 50/50 between spouses. However, if a large item was given as a gift, we may be able to categorize that item as yours or your spouse’s, depending upon the specifics.

Collections Attempts

In a Chapter 13 filing, the automatic stay is effective for the co-debtor on consumer debt. This means that if one spouse files and another does not, and they hold joint debt, even if they are not paying on that joint debt, creditors cannot pursue collections against either spouse. So the calls stop, and you get to preserve your credit at the same time. Not only that, but for joint debt, creditors cannot repossess property or foreclose on your spouse just because she didn’t file.

This automatic stay remains in effect until the bankruptcy is over. However, once the bankruptcy concludes, the creditor can resume attempts to collect against the non-filing spouse for those joint debts. At that time, the hope is that you’re able to make payments on that debt because of the relief the bankruptcy provides.

A Backup Plan

Another reason to have one spouse file is to provide a backup plan if you get into a spot where you cannot make your Chapter 13 payments. If the first filing is dismissed for non-payment, the non-filing spouse could consider filing a new Chapter 13 to get relief from creditors.

Do not Worry, Call A Lawyer

The good news is your bankruptcy lawyer addresses all of these potential hurdles for you, and in doing so provides for a smooth bankruptcy filing. Call us to speak with a lawyer today. We can be reached at 704.749.7747 or you can simply click HERE to request a call. For further reading, this ABI article on non-filing spouses may be helpful.

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.

Debt Consolidation For Credit Cards

If you are considering debt consolidation for credit cards, you need to read this blog post. First, it is important to know there are a few ways to consolidate your credit card debt. Each program being offered will be different. In any case, first, we will quickly go over the different types of debt consolidation, and then discuss a few pitfalls and other options.

Types Of Credit Card Debt Consolidation

Balance Transfer – When you do a balance transfer you are essentially transferring several credit card balances to one credit card. It could be due to a low introductory rate, or some other special terms, which are more favorable than the prior card or cards.

Debt Consolidation Loan – Some banks will offer you a loan that you can use to pay off your credit card debts. You will be left with one balance on the loan, and usually at a lower interest rate than the credit cards you paid off.

Debt Management Program – This is the most traditional form of debt consolidation. In this instance, you work with a credit management company. They establish a payment structure for you and a timeframe. The credit management company negotiates with your creditors to lower your balances. Usually, the negotiated amount is contingent upon you completing the consolidation plan.

Three Common Pitfalls To Credit Card Debt Consolidation

Fees And Costs – Whether the fees come in the form of high interest or third-party fees charged by your credit card management company, it is important to understand what fees you are being charged. The lengthy contracts consolidation companies provide you with can be difficult to sort through. The point is you are paying for a service. You are entitled to know how much the service is costing you. This way, you can comparison shop and set your bottom line for how much it is costing to eliminate your debt.

Dropping Out Of The Consolidation Program –

Many debt consolidation agreements are contingent upon your completion of the term. The term may be for three or more years. During that timeframe, anything could happen which might prevent you from being able to make your payment on time. You want to be aware of the penalty for late or missed payments, and get confirmation that you will not lose the progress you made along the way by making consistent on-time payments in the program.

Worrying Too Much About Your Credit Score –

It is important to be concerned about your credit score. You should think carefully before spending thousands of additional dollars for the sole purpose of sparing a few credit score points. As a bankruptcy attorney, I speak with clients every day who are worried about their credit score. I do my best to help them see the full picture. Often, those clients already have a reliable vehicle and own a home. If that is the case, I encourage them to look at the upside to eliminating the debt—no matter how they choose to do it—instead of obsessing over how it will affect their credit score.

What Other Options Are There?

Bankruptcy is worth considering. Both Chapter 13 and Chapter 7 are options in consumer bankruptcy. Every bankruptcy attorney I know in Charlotte, North Carolina will give you an honest answer as to whether you should file bankruptcy or not. This means you should consider having a free consultation with a bankruptcy lawyer to make sure you understand the cost of bankruptcy versus the cost of debt consolidation. If a client can eliminate $25,000 of unsecured debt by filing bankruptcy for under $3,000, it is going to be difficult to justify a debt consolidation program that charges $525 a month for 36 months.

Debt settlement is another option. Because we are a bankruptcy law firm, we obtain good results for clients attempting to settle the debt. When you are settling a debt with a creditor, you are proposing to pay them a small portion of the debt in 90 days or less, in exchange for forgiveness of the remainder of the debt. To accomplish this, you must have access to a lump sum of money to pay the creditor. It is not uncommon to receive a dramatic reduction from the outstanding balance in exchange for timely payment of a small percentage of the debt. In a prior post, we have discussed how a debt settlement affects your credit score.

Speak With A Bankruptcy Lawyer Today

If you are considering consolidating credit card debt, you deserve to understand all your options. We would be happy to discuss bankruptcy, debt settlement, and credit card consolidation with you. Then, we can help you make the decision that will work best for you. Sometimes, just one phone call is all it takes to discover you have more control over the situation than you thought.

If you would like to speak with a bankruptcy attorney, call us at 704.749.7747 or click HERE to request a phone consultation. Consultations are free and answering questions is part of our job. We are here to help.

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.

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.

What Is The Bankruptcy Process?

Thank you for choosing to work with The Layton Law Firm to file your bankruptcy. Completing the online MyCaseInfo questionnaire is required in order to see if you qualify for Chapter 7 or Chapter 13. Once you have completed the questionnaire, we can analyze it and confirm for you that bankruptcy is a good option. The bankruptcy process can be smooth and painless if you and your bankruptcy lawyer have a good working relationship.

After confirming whether you will file a Chapter 7 or 13, we put a plan in motion to gather all necessary documentation and information required for a successful bankruptcy filing. Generally speaking, this article Is meant to help you understand the process going forward. If you need to file an Emergency Bankruptcy, this article still applies; however, your bankruptcy will be filed first, and then we will quickly work to fulfill the remaining steps.

Gathering Required Documentation

Before we can put together a draft of your petition for you, we need to review certain documents. You will be provided with a short list of documents we need. For example, we need copies of your mortgage statement and vehicle loan statements to confirm balances. We can also verify your income with the pay stubs you provide. Your bank statements help us to identify any transfers which need to be disclosed in bankruptcy in order to comply with the bankruptcy code.

Bankruptcy law firms have a duty to hold certain supporting documentation and deliver it to the bankruptcy trustee upon filing, or if requested. While we try to limit the documentation required, please know we are only trying to insure a successful filing for you.

If you are a small business owner, you will most likely need to submit a 12 month profit and loss statement, to show the court how much income you are generating from the business. Most business owners can file a Chapter 7 or 13, and are not required to file a Chapter 11 business bankruptcy.

Answering Follow Up Questions

Once we have had time to review the documentation you provide, we will quickly follow up with you, with any questions we have. We may ask you to assist in determining the value of an asset, or to help us properly disclose the sale of some property that took place in the time frame leading up to the bankruptcy filing.

Drafting Your Petition

Once we have your documentation and we’ve resolved any questions we had regarding income and assets, we can draft your bankruptcy petition. The bankruptcy petition is the document which requests the court to grant you the relief allowed by the bankruptcy code, in exchange for full disclosure in compliance with the rules of bankruptcy.

The petition is the debtor’s vehicle for thoroughly disclosing income and assets, and also identifying creditors so that the court can provide the creditors with notice of your bankruptcy filing. The petition is your way to communicate your entire financial picture to the court. The trustee will examine the petition during the time leading up to your 341 meeting, and may request additional information about items listed in the petition. It’s important that the petition is accurate, and our job is to help you meet that goal.

Reviewing Your Petition Draft

Having a draft of the petition marks a significant step in the process and indicates you are in the homestretch toward your filing. We will provide you a draft copy to review, and schedule a phone call or a time to meet together, to go over the items in the petition. This document is a very helpful tool in assisting the attorney and the debtor in properly identifying assets, income, expenses and creditors.

Finalizing The Petition

After the review process, our firm will make any necessary changes to the petition. At that time, you will be asked to review those changes and sign the petition. While we can file your petition electronically, you have to sign it before it is filed.

Attending The 341 Meeting

Once your petition is filed, the court will assign a 341 meeting date. This date is typically 45 days after the filing date. This gives both the attorney and the debtor plenty of time to make sure their schedule will allow them to attend. Requests to reschedule the 341 meeting are not often granted, and should be reserved for emergencies only.

At the 341 meeting, the trustee will ask you if you reviewed the petition and signed it. He or she will also ask you and your attorney about a few items disclosed on the petition. In some cases, the trustee may ask for additional documentation. For example, if you disclosed that you sold a vehicle six months before filing your petition, the trustee may ask your attorney to provide proof of the sale.

The 341 meeting is typically the only court appearance the debtor makes.

Filing Reaffirmation Agreements

If you are reaffirming any debt as part of your bankruptcy, the reaffirmation agreements will need to be generated, signed and filed shortly after the 341 meeting. We will discuss reaffirmation agreements with you before we file the bankruptcy, and in many cases there is no need for a reaffirmation agreement.

Completing The Financial Management Class

Before your discharge is entered, you must complete the second and final online counseling course. It’s just the rule.

Receiving Your Discharge

After a waiting period for creditors to object—they rarely do—your discharge will be entered and your case will be closed. This is the final step in the bankruptcy process.

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.

If you are considering filing Chapter 13 bankruptcy, it’s important to understand the costa and benefits of this type of filing. Prior to filing, your attorney will discuss both Chapter 7 bankruptcy and Chapter 13 bankruptcy with you. While both result in a discharge, the paths taken to get there are quite different. A Chapter 7 is a fast, clear-cut discharge of debt, while a Chapter 13 bankruptcy involves the confirmation of a plan and monthly plan payments. So why would someone choose a Chapter 13 over a Chapter 7?

Make Up Past Due Balances On Home and Vehicles

In a Chapter 7, if you’re behind on a home or vehicle, you can file bankruptcy but you have to surrender the property in the bankruptcy. Conversely, in a Chapter 13 bankruptcy, you can successfully file even if you’re behind on a vehicle or home, and you can use Chapter 13 to slowly catch up on the payments.

For example, if you are behind $10,000 on your home mortgage, your Chapter 13 bankruptcy will prevent your lender from foreclosing on the property. In exchange for this protection, you make a Chapter 13 payment each month consisting of your normal mortgage payment, plus a portion of the amount you were behind when you filed. Over the course of the 60 month repayment plan, you will slowly but surely get current on the mortgage. Essentially, this forces your lender to allow you a repayment plan for the amount you were behind. Your Chapter 13 bankruptcy payment schedule reflects this.

Manage And Pay Tax Debt

There are instances where old tax debt is discharged in a bankruptcy. This is true of both Chapter 7 and Chapter 13 bankruptcy, and generally relates to taxes which are more than three years old and which have been properly filed. For other tax debt, only a Chapter 13 filing puts you on track for being caught up with both the IRS and the NC Department of Revenue at the completion of your plan.

When you file your Chapter 13, the same tax debt which would be discharged in a Chapter 7 is also discharged in a Chapter 13. In addition, any other outstanding debt will be scheduled to be repaid in full over the course of the Chapter 13 repayment plan. This means that at the end of the Chapter 13, when you make your last payment, you will be current on your taxes.

Minimal Payments to Unsecured Creditors

Typically, your Chapter 13 bankruptcy payment plan will consist mainly of mortgage, vehicle, and other secured debt payments– quite often your unsecured creditors (credit cards, medical bills) are getting zero to 10% in the Chapter 13 plan. The reason for this is that the Chapter 13 plan payment has a feasibility component which drives how much money you have to pay to your unsecured creditors. As a result, you only have to commit your disposable income to your unsecured creditors. After taking into consideration monthly expenses and tax and mortgage obligations mentioned above, this often leaves very little for the unsecured creditors. So long as you commit the entirety of this disposable income to the unsecured creditors, your plan should be recommended for confirmation by the Chapter 13 trustee.

Lowered Balances On Secured Debt

Chapter 13 also allows you to lower the balance owed on property, so that it is equal to the fair market value of the property at the time of your Chapter 13 bankruptcy filing. This occurs mostly with vehicles. One requirement is you have owned the vehicle for more than 910 days, or roughly three years. If so, your Chapter 13 will lower the balance owed on the loan, and pay the loan off over the course of the Chapter 13 plan. This helps in two ways: first, you’ve stripped away debt in excess of the fair market value of the vehicle; second, you are spreading the remaining debt over the course of the 60 month repayment plan which effectively lowers your car payment and allows you to afford other necessities of life.

Speak With A Chapter 13 Bankruptcy Lawyer Today

If you have questions about a Chapter 13 bankruptcy, Chapter 13 bankruptcy plan payments, or any other aspects of Chapter 13 bankruptcy, please request a FREE CONSULTATION today, or call us at 704.749.7747. We will be happy to provide answers and help you determine your options.

What Does Bankruptcy Do To Your Credit Score?

Bankruptcy affects your credit score differently, depending upon what your credit score is just prior to filing. You can expect that your credit score will drop after filing bankruptcy, but it will also recover quickly if you take the right steps after bankruptcy to increase your credit score.

If your credit score is above 650 before filing bankruptcy, you can expect a significant drop in your credit score, according to Experian. However, you should remember that your purpose for filing bankruptcy is less related to your credit score and more related to being able to balance your budget. You can recover your credit score after the debt is gone.

If your credit score is below 650 before filing bankruptcy, you can expect your credit score to drop but not in a significant way. In fact, your credit score will bounce back within a year from filing the bankruptcy and go up from there.

Does Chapter 7 Affect My Credit Score Differently Than Chapter 13?

When it comes to your credit score, it does not matter what chapter of bankruptcy you file. Some clients feel better about filing a Chapter 13 than a Chapter 7 because in Chapter 13 you are paying back some of your debt. We encourage clients to file the chapter of bankruptcy that makes most financial sense for them. We help you to make that decision, of course.

Improving Your Credit Score After Bankruptcy

Keep in mind that while filing bankruptcy lowers your credit score, you will also get a bump up in your score when your debt to income ratio changes. While filing bankruptcy doesn’t change your income, it does change your debt. As a result, your “debt to income” ratio changes in your favor. This is one of the key factors used to calculate your credit score.

Once your bankruptcy case closes, the key to improving your credit score is to make payments to creditors who will report your payments to the credit reporting agencies. Most commonly, mortgage payments and vehicle loan payments are a way to do this. If you do not own a home or car, you can take out a secured credit card at a local credit union. This is a quasi-credit arrangement where you give the credit union a small amount of money. Then, each month, you spend or borrow against that money by making purchases on the card. When the monthly statement comes, you pay it off. In exchange, the credit union will report your payments as positive payments to the credit agencies and it will help build your credit.

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 “What does bankruptcy do to your credit score?” was helpful, you may find other helpful articles on our Bankruptcy Blog. Thank you for visiting the website—we hope it has been helpful.


How Does Bankruptcy Work In NC?

The way bankruptcy works in NC is that you file either a Chapter 7, Chapter 11, or Chapter 13, and follow the rules provided by the bankruptcy code in order to obtain your Discharge in bankruptcy.

The Length Of Your Bankruptcy

Depending upon which chapter you choose, the length of your bankruptcy will differ. If you choose Chapter 7, you will have a 341 Meeting about 45 days after the filing of your bankruptcy. Your Charlotte bankruptcy attorney will attend the meeting with you, and you’ll answer questions from the trustee. Generally, creditors do not show up to this meeting.

About 60 days after your 341 meeting, provided there are no challenges to your bankruptcy, you will receive your Discharge. This means the court agrees that your bankruptcy filing is proper and your debts should be extinguished by way of your bankruptcy filing.

Sometime between the 341 meeting and the entry of your Discharge, your trustee will typically close your case as well. This means the trustee has reviewed the case and determined there are no assets to distribute to creditors. Once the trustee has closed your case, and the court has entered your Discharge, your Chapter 7 is complete.

Choosing Chapter 13 Bankruptcy

If you choose Chapter 13, the answer to the question “How does bankruptcy work in NC?” has a slightly different answer. Mainly, the difference is the length of your bankruptcy is much longer. However, there is good reason for this. Most people choose Chapter 13 to save a house or car if they are behind on payments. The Chapter 13 is typically 60 months long and allows you to get caught up on these payments while preventing your creditors from trying to take action against you. So long as you make your Chapter 13 payments, when you reach the final payment you will be caught up on the house and car, and you will also receive a Discharge for you unsecured debt (credit cards, medical bills, etc.).

Despite the length of a Chapter 13, provided you make your Chapter 13 payments on time, you should not have to attend court during your bankruptcy. If there is the need for a hearing, your attorney can often attend without you, which makes Chapter 13 quite convenient.

Choosing Chapter 11 Bankruptcy

A Chapter 11 bankruptcy is similar to a Chapter 13 bankruptcy; however, it is more suitable to corporations and small businesses that need to “reorganize” their debt. Whereas the trustee approves or recommends a Chapter 13 case for confirmation to move forward, your attorney must negotiate with each creditor in a Chapter 11. Despite this, the result is fairly similar—you enter into an agreement to pay back a percentage of your debt in exchange for protection of the bankruptcy court.

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.