The new bankruptcy laws that went into effect in October 2005 still offer good protection for financially challenged families in North Carolina. The bankruptcy laws have been through many similar reforms over the years, but remain a strong critical option when payments on debts are just too high in proportion to income. Attorney Rod A. Vujovic and his staff have attended many bankruptcy seminars and continuing legal education classes in order to stay updated on the latest developments in consumer bankruptcy law, so we can continue giving our clients a fresh new start through bankruptcy.
Just when Congress revised the bankruptcy laws to prevent abuse by those able to pay their debts, our North Carolina legislature raised the amounts you will be allowed to claim as exempt property in your bankruptcy. That means that you will be able to retain more equity in your house, vehicle, and other property than before the new law. For example, under the old law you would not be able to file a Chapter 7 bankruptcy without losing your house if the equity exceeded $10,000 per spouse. Under the new exemptions, a full $35,000 per spouse of home equity would be protected. In many cases, a widowed spouse can protect up to $60,000 in home equity. For your car, each spouse can protect $3,500 of equity, up from only $1,500 per person before. In addition to these and other exemptions, there is a special "wild card" exemption that may allow each spouse to protect $5,000 in any property, including any extra value in your car. There is even an additional $5,000 exemption per spouse, and an additional $1,000 per dependant, that can be used to protect "household goods". If the equity in any of your property exceeds these North Carolina exemption amounts, you might be able to file Chapter 13 bankruptcy and still keep your property. We will review your individual situation and advise you as to your best option.
What is a Chapter 7 Bankruptcy?
Chapter 7 is the most common form of bankruptcy. It is also the simplest to file. In a Chapter 7 bankruptcy, you will not repay many of your debts, and your creditors will be forbidden to attempt collection from you.
Certain debts are not dischargeable, including any debt that is not listed in your schedule of creditors, certain taxes, alimony, child support, criminal debts, student loans, and a few others. We can help you to determine whether or not a debt will be eligible for discharge.
What is a Chapter 13 Bankruptcy?
Chapter 13 is also known as a reorganization or consolidation bankruptcy, because your debts are reorganized into a payment plan over 3 to 5 years. At the completion of the Chapter 13 plan, your debts will be discharged, much like in the Chapter 7.
Certain debts that would not be dischargeable in a Chapter 7 might be handled in a Chapter 13. We will advise you on whether Chapter 13 would be appropriate for you, depending on your income, assets, and type of debts.
Do I Get To Keep My Property?
Can I Keep My House?
North Carolina law allows each spouse or individual to keep $35,000 equity in a homestead. A homestead is defined as your personal residence (mobile home or house plus land) that you are living in at the time of the bankruptcy filing. Equity is determined by subtracting the amount that you owe on your mortgage(s) from the fair market value of your home.
If your home equity does not exceed $35,000 ($70,000 for married couple and many widowed spouses) you should not have a problem keeping your home in a Chapter 7, as long as you are current on your house payments both at the time of filing and also in subsequent months. If your equity exceeds the allowed exemption or if you are behind in your payments, a Chapter 13 might allow you to save your home.
The automatic stay protects you from foreclosure of your house during the time your bankruptcy case is open. However, if your payments fall behind after filing, the bank may ask for court permission to lift the automatic stay and begin foreclosure proceedings
To help determine the value of your home, review any recent appraisals of your home, or check with your county tax department for the current tax value assessment of your real property.
Can I Keep My Vehicle(s)?
North Carolina state law allows each individual to keep $3,500 equity in a motor vehicle. To determine the amount of equity you have, we will need an accurate current RETAIL market value of all of your vehicles as well as the payoff amount. You may obtain the retail value of your vehicle online for free at www.nadaguides.com -- If your equity exceeds the $3,500 mark, other exemptions might allow you to protect up to $8,500 in your vehicle equity.
If your car is "upside down," meaning you owe more than it's worth, we recommend that you look into the possibility of surrendering the vehicle, which allows you to get out from under that crushing monthly debt and purchase or finance a less expensive car after bankruptcy. Another possibility is to "redeem" the vehicle by paying the current retail value of the vehicle, and the remaining loan balance would be discharged. We may be able to assist you in finding a lender that will give you a new loan to pay this redemption amount to your existing lender, which could save you thousands of dollars compared to your current vehicle loan.
Will I Lose My Retirement Savings?