You can protect assets in your Wilmington bankruptcy
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One of the things people are most worried about when they file bankruptcy is how it will affect their assets. With Chapter 13 Wilmington bankruptcy, you can often protect most all your assets, but with Chapter 7 bankruptcy, you might not be able to shield as much. Because of this concern, clients often ask if they can pay off some items or make special arrangements to protect specific assets. Here’s what you should know.
Bankruptcy Exemptions Are Step One
North Carolina bankruptcy exemptions allow you to protect a reasonable amount of assets during your Wilmington bankruptcy. You can protect up to $35k in home equity for an individual bankruptcy and double that if you file with a spouse. If you’re over 65 and your spouse is dead, the amount can be up to $60k. For your car, you can shield up to $3500. Equity is calculated as the value of the item less any loan attached to it. So, if your home is worth $150,000 and your mortgage is $130k, you have $20k in equity.
You can shield another $5k in furniture, clothes, household items, and appliances, and the like. For each dependent, you can add another $1k up to a maximum of $4k. Tools for work, whether actual tools or manuals, a computer, etc. can be protected up to $2k. North Carolina also offers a $5k wildcard exemption that can be applied to anything you want an additional $500 in personal property. If you have assets beyond these limits, there are some other options to consider.
Reaffirmation Agreements Can Save Assets
Another option to save assets that cannot be fully protected by Wilmington bankruptcy exemptions is the reaffirmation agreement. Executing a reaffirmation with a creditor carves that specific secured debt out of the bankruptcy case. This can be a good or a bad thing, depending on how your finances go after the bankruptcy case. For instance, if you can’t protect the equity in your auto and still have a loan on it, you can reaffirm the debt with your auto lender.
You sign a document exempting it from your Chapter 7 case. To qualify, you must sign by choice (i.e., it's voluntary). You must also be able to afford the debt. If reaffirming the debt is not in your best interests, the bankruptcy court can refuse to allow the reaffirmation. Also, the Wilmington bankruptcy court can overturn the agreement at any point before the Wilmington bankruptcy discharge or 60 days after the agreement was filed with the court, whichever is later.
The Dangers of a Reaffirmation Agreement
Here’s the big problem with a reaffirmation agreement. Say you use an agreement like this for your car loan, finish up your Chapter 7 bankruptcy, and then find you can’t afford the payments on your vehicle. Your vehicle can be repossessed by the lender, and once they sell the car at auction, any balance owed on the loan will be your responsibility. The bankruptcy you filed can’t help you with the debt because it was excluded from the case. That can leave you in a bad situation.
A reaffirmation agreement isn’t something to enter into lightly because it can potentially diminish the results you get out of your Wilmington bankruptcy. This is a complex area of bankruptcy law and something to discuss with your bankruptcy lawyer before you make a decision. To find out how reaffirmation agreements work, discuss them with an experienced and reputable North Carolina bankruptcy attorney. Bring in your loan documents with your other financial papers.
To find out more about the benefits of bankruptcy and how you can shield assets while getting the debt relief you need, contact the Law Offices of John T. Orcutt. Call +1-919-646-2654 now for a free Wilmington bankruptcy consultation at one of our convenient locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.