Questions to ask a bankruptcy attorney
Image Source: Flickr User Milos Milosevic
Bankruptcy is usually an option of last resort for overly-indebted consumers – as it should be. It's a serious step and one that can't be undone once taken. That being said, bankruptcy can be of significant benefit to you under certain circumstances. For some consumers, filing bankruptcy is a matter of proper timing to get the most benefit. There are also considerations for the type of bankruptcy to file and what you hope to accomplish. Here are five things to discuss with your bankruptcy attorney prior to filing:
#1 What is your overall financial goal?
You shouldn't go into bankruptcy blindly. There should be a purpose to your filing. It may be that you want to stop a foreclosure on your home or you need to put an end to aggressive debt collections. You may need to clean up your credit in order to get (or keep) a job or a security clearance. You may be dealing with private student loans you can't afford, are trying to avoid a judgment or are being threatened with lawsuits by creditors. Whatever financial crisis is going on, you need to lay it all out for your lawyer so they can help you develop a strategy and goal for your bankruptcy filing.
#2 Which type of bankruptcy is best for you?
For most consumers, Chapter 7 or Chapter 13 are the typical options. Chapter 7 is a bankruptcy liquidation. In a liquidation, you can have qualified unsecured debts discharged. Some debts will remain such as federal student loans, mortgage and car loan. However, if your house or car have been foreclosed on or repossessed, the remaining debt can be wiped away. If you're current on your mortgage or car loan, these can remain untouched in Chapter 7 while other debts are discharged. In contrast, a Chapter 13 bankruptcy puts you on a repayment plan to get caught up on past due debts.
#3 What assets do you have to protect?
This discussion may inform the decision of which type of bankruptcy to file. The state of North Carolina has set exemptions that apply to bankruptcy cases. For instance, if you own a home and are current on your payments, a certain amount of equity can be protected. NC law allows $35,000 of home equity protection and double that if you file jointly with your spouse. State law also protects equity in a vehicle, some cash in the bank and a reasonable amount of personal assets. If you have more equity than can be protected by bankruptcy exemptions, a Chapter 13 is preferable over a Chapter 7.
#4 What types of debts do you have and how far behind are you?
If you are late on payments for secured debts such as a mortgage or car loan, a Chapter 13 will allow you three to five years to get caught up. However, if most of your debts are unsecured, such as medical and credit card bills, a Chapter 7 will get you completely clear of these debts within a few months. If your debts are about to expire under North Carolina's statute of limitations, filing bankruptcy may not be your best option – you may be better served by waiting out the statute. If you owe a modest amount such that you can work out payment arrangements with your creditor, this may be preferable.
#5 How much money do you make compared to your debts?
If you earn a good wage, you may think you won't qualify for bankruptcy, but this is not true. First, anyone can file Chapter 13, no matter how much they earn. Second, even if you earn a good living, if you have more debts than you can afford to pay, you may qualify for Chapter 7. Even millionaire celebrities file for and enjoy the protections of Chapter 7 bankruptcy. Don't assume that you won't be able to enjoy the benefits of bankruptcy. No matter how much you earn or owe, if you're struggling to pay your bills, it's worth consulting with an attorney to find out your options.
If you live in North Carolina, contact the law offices of John T Orcutt today for a free consultation with one of our bankruptcy experts. Call +1-919-646-2654 to learn more – we have offices in Raleigh, Fayetteville, Greensboro, Garner, Wilson and Durham. Be sure to ask about our zero down bankruptcy specials!