7 Things You Need to Know Before You Consider North Carolina Bankruptcy Skip to main content

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7 Things You Need to Know Before You Consider North Carolina Bankruptcy



Understand bankruptcy before you jump in

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Sometimes you need help when you can’t dig yourself out of a financial rut. Bankruptcy may be the best solution for you if you have done everything possible to correct your debt situation but nothing has worked. If you tried earning more, spending less, working out payment plans, and digging into savings, but nothing worked, bankruptcy could be the solution for you. Here are seven things you need to know before you jump into bankruptcy.

#1 Bankruptcy Doesn’t Eliminate All Debt

Bankruptcy will not eliminate all of your debt. Unsecured debt, like medical bills, personal loans, qualifying older tax debts, and credit cards, can be wiped out in Chapter 7. With Chapter 13, some or all of your unsecured debt can be discharged. Secured debt like a car loan or a mortgage cannot be discharged in either type of bankruptcy, but bankruptcy may help stop foreclosure or repossession.

#2 Chapter 13 Takes Years to Complete

Chapter 13 bankruptcy is a repayment plan that requires you to pay current monthly amounts on secured debt like a car loan or mortgage, plus your living expenses, plus an amount each month that goes towards catching up on past-due balances on secured debt such as mortgage payments in arrears. In North Carolina bankruptcy, Chapter 13 repayment plans last three to five years start to finish.

#3 Chapter 7 Is Fast but Has Stricter Requirements

With Chapter 7 bankruptcy, you can see a significant amount of debt discharged within just a few months, but there are stiffer requirements to meet to qualify for Chapter 7 than Chapter 13. If you have a lower income, Chapter 7 should be simple to qualify for, but if you earn a middle to high wage, you have to show that your debt outweighs your ability to pay despite your healthy earnings.

#4 Your assets and equity are important considerations

If you own a home or other assets, the amount of equity in those assets is a consideration when deciding on bankruptcy. North Carolina bankruptcy offers exemptions which let you protect a reasonable amount of equity. You can shield $35K of home equity for an individual bankruptcy filer. For a couple filing jointly, $70K of equity in a home can be shielded. Talk to an attorney about your assets.

#5 Your Credit Will Not Be Ruined

It’s a myth that filing bankruptcy ruins your credit for a decade. Being deep in debt you can’t afford usually wrecks credit long before consumers consider bankruptcy. After bankruptcy, with a clean slate, you can begin to rebuild your credit within just a few months of discharge. Studies have shown higher credit scores result after consumers file bankruptcy than continuing to battle unmanageable debt.

#6 You Must File Your Taxes

It’s a requirement that you are current on your income tax filings to get bankruptcy protection. If you have not filed recent taxes, you need to file them ASAP. Even if you can’t afford to pay your taxes, you should always file your tax returns on time so that the clock starts ticking on the statute of limitations for the IRS to collect the debt from you. Back taxes may be eligible for bankruptcy discharge.

#7 Eliminating Debt Doesn’t Cure the Cause

Wiping out debt in bankruptcy treats the symptom, not the cause. It’s important to know what events or decisions resulted in you finding yourself in over your head with debt. For most of our clients, it’s a major life event like unemployment or a divorce or other circumstance that increased expenses or cut income. It’s a wise strategy to clear up the underlying problem and then file bankruptcy for best results.

To find out more about the benefits of North Carolina bankruptcy, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free North Carolina bankruptcy consultation at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.

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