What Types Of Debts Can Bankruptcy Get Rid Of?
In general, most unsecured debts may be discharged in bankruptcy. Unsecured debt includes: credit card debt, unpaid medical bills, and personal loans.
Will I Have To Go To Court?
It is unlikely that you would have to appear in court before the bankruptcy judge. However, there is a mandatory meeting with the bankruptcy trustee and creditors that all debtors must attend about 30 days after your case is filed.
Will Bankruptcy Wreck My Credit?
Yes, filing bankruptcy will affect your credit and could be on your credit report for up to ten years. However, it won’t be a permanent mark against you and you will be able to obtain credit such as car loans, credit cards and mortgages in the future. Bankruptcy provides a way to clear away eligible debts and enable you to start rebuilding your credit once again.
Will I lose all my property when I file bankruptcy?
Not normally. The vast majority of individuals who file Chapter 7 in North Carolina will be able to keep all of their property. Individual debtors are entitled to claim equity in certain property as exempt from the claims of their creditors. For example, each debtor who has lived in North Carolina for the last two years may claim a homestead exemption of up to $35,000.00 of equity in their primary residence, including mobile homes. Generous exemptions are also available to cover personal property such as a motor vehicle and household furnishings. It is only when there is sufficient equity in property that can be realized through liquidation of the property that you may be at risk for losing certain items of property.
In a Chapter 13 case, you are able to retain all of your property and claim all available exemptions. Unlike Chapter 7, any equity in your property that would not be covered by an applicable exemption would be factored into the Chapter 13 plan payment. Instead of losing property that may have unprotected equity of $10,000.00, Chapter 13 would allow you to propose a plan, in part, that would provide that $10,000.00 to your creditors in the way of regular monthly payments to be paid over a period of up to five (5) years.
What specific debts can I discharge in my bankruptcy?
Generally, unless you have abused a credit card, or lied on a financial statement, your unsecured debts such as credit cards, unsecured loans, overdraft protection, guarantees of debt, and deficiencies on repossessed or foreclosed property, will be dischargeable in a bankruptcy proceeding.
Medical bills may also be dischargeable, however, medical bills are deemed to be joint liabilities if you have a spouse. Therefore, if only one spouse files bankruptcy, the non-debtor spouse may still be liable for medical bills incurred during the marriage. There are certain exceptions including domestic obligations such as alimony, child support, and/or property settlements.
The following certain debts are not likely to be discharged in Bankruptcy: (1) debts contained in a property settlement if pursuant to valid separation agreement or court order; (2) debts arising from intentional infliction of personal injury; (3) debts arising from drunk driving; (4) educational loans; or (5) debts obtained by false pretenses, fraud, or false written financial statement.
However, you may be able to discharge your personal liability on non-reaffirmed secured debt such as houses or cars, where you have surrendered the property and are exposed to a potential personal liability for the deficient payments.
Taxes are generally not dischargeable in Bankruptcy, however, certain taxes assessed more than a few years before a bankruptcy may be dischargeable. Trust taxes, like withholding tax or sales tax, are generally not dischargeable to the extent of personal liability.
Finally, if you desire to keep certain property against which there is a lien, such as a car title, you must either redeem the property, reaffirm the debt, or with the consent of the creditor, simply continue to pay for the car, as the lien is not extinguished by the filing of a bankruptcy petition.
If the debt is reaffirmed, then you remain personally liable for the entire debt. Generally, it is not necessary to reaffirm a mortgage on a house, although a rare exception may arise where the ‘events of default’ under the deed of trust include the filing of a bankruptcy.
Is it true that I can never get credit again?
No. While a bankruptcy filing is a negative credit event, you may receive credit card offers shortly after the entry of discharge. These initial credit cards will be for lower limits, may be secured through pre-payment of a set amount and/or carry higher interest rates. However, it is recommended to use credit cards sparingly and always pay the card balance to $0 each month. If you exercise this discipline, you will have the freedom of using a credit card, but will usually avoid the higher interest rate if the card is paid in full each month. Proper discipline in the use of the credit card post-petition may help re-establish your credit history.
The general rule is that debtors will qualify for home loans two years after the entry of a bankruptcy discharge. However, some bankers and credit managers may allow one year of good credit history after bankruptcy discharge to qualify for a home loan. However, the interest rate you will pay for the home loan will be dependent upon your credit score and other specific facts and circumstances of your case.
A bankruptcy discharge, if you have secured debt that you are paying in a regular fashion after bankruptcy, it not the complete end of your ability to get credit. Most people filing for Bankruptcy are allowed to keepp their homes and cars after bankruptcy, so long as they continue to make timely and regular payments on that debt. This allows a quick re-establishment of credit as those timely payments appear on their credit report. The key to future credit availability is having a stable, future income and using credit responsibly.
Can creditors continue to contact me after bankruptcy?
No. The filing of a bankruptcy proceeding results in the immediate and automatic issuance of an automatic stay, which acts like a stop sign for your creditors. The automatic stay prevents creditors from calling you, contacting you, suing you, repossessing or otherwise taking adverse action against you to collect a debt. This includes harassing phone calls you may have been receiving as a result of the failure to pay a certain debt. Although the stay begins at the time of filing, it may be a week or so before creditors receive notice of your bankruptcy.
If you are contacted by a creditor filing bankruptcy, simply inform the creditor that you have filed, and give them your case number. Once the creditors have recieved notice, there should be a dramatic decrease in creditor contact.
If you are keeping certain property such as houses and cars, it is important to realize that many creditors will stop sending monthly payment reminders, so as not to violate the automatic stay. Thus, it requires discipline on the debtor’s part to make regular and timely monthly payments to these creditors without being prompted to do so. Additionally, if you are surrendering property in a bankruptcy case or are behind in payments at the time the bankruptcy is filed, creditors may hire lawyers to file motions to lift the stay. These motions, if granted, may allow the creditor to seek immediate repossession and sale of their property prior to entry of your discharge. Again, in Chapter 7 as well as, Chapter 13 and 11 proceedings in which you are reorganizing over a period of years, you must continue to make regular payments to creditors on the property you retain.
Can I File Bankruptcy More Than Once?
Yes. However, there are time limitations that may affect your ability to have certain debts discharged.
How Do I Know If Bankruptcy Is Right For Me?
If you’re facing foreclosure, struggling with out-of-control debt or other financial calamity, you owe it to yourself to consider your options. There’s no substitute for meeting with an experienced bankruptcy lawyer to discuss your options and find out whether bankruptcy is right for you. Pierce Law Group today to have one of our attorneys review your case.