FAQs

No.  The Bankruptcy Code has strong antidiscrimination protections afforded government and private employees.  These protections prohibit an employer from terminating or discriminating against an employee that is or has been a debtor in bankruptcy, or that was insolvent before or during the case, or has not paid a debt that is dischangeable in the case. 

No. You naturally may be tempted to “feel out” your employer concerning your decision to file bankruptcy. This would be a mistake as 11 U.S.C. Sec. 525(b) prohibits a private employer from terminating or discriminating concerning employment against an individual employee that “is or has been” a debtor in a bankruptcy proceeding. Most courts hold that this protection does not protect an employee that is only considering filing bankruptcy. Therefore, if you tell your employer you are considering filing bankruptcy you may be fired as you are not yet protected by the antidiscrimination protection afforded those that are “in or have been” a debtor in bankruptcy. This is especially true if you owe your employer money. Similar, but broader, antidiscrimination protection is afforded to government employees under 11 U.S.C. Sec. 525(a). 

No, you do not have to file bankruptcy with your spouse.  If your spouse has little debt it would generally not be advisable to file a joint case since the good credit of the non-filing spouse could be maintained in case of a financial emergency. 

 

However, it is often advisable to file a joint case if there are joint debts or your spouse has their own debts. If only one spouse files bankruptcy the family’s income must still be used to pay the bills of the non-filing spouse, which debts might have been discharged through bankruptcy. The legal fee and filing fee will usually be the same whether one or both spouses file. It is not uncommon for one spouse not to initially file, only to find themselves filing bankruptcy years later. We will help you make this important decision during the initial free consultation. 

 

If a joint case is filed, the cases are really to two separate cases which are jointly administered for convenience. Therefore, if there are non-exempt assets which belong to only one spouse, those non-exempt assets will generally only be used to pay that spouse’s creditors. 

Yes. Upon the filing of a bankruptcy petition the automatic stay will stop a foreclosure, as long as it is filed within the upset bid period established under North Carolina State Law.  If your real estate is located in a state other than North Carolina you may have to file bankruptcy sooner to save the property.  Generally, the best time to file bankruptcy is before the foreclosure hearing, although a bankruptcy filing will stop the foreclosure as long as it is filed within the upset bid period which ends at the close of business on the 10th day after the foreclosure sale (if an upset bid is made, then it will run at the close of business on the 10th day following the last upset bid).  Those trying to keep a house with a past due mortgage will file either a chapter 13 or a chapter 11 to catch up on their past due mortgage over a period of up to 5 years.  If a chapter 7 is filed the automatic stay will stop the foreclosure but the delay in the process may only be temporary since the mortgage creditor can apply to the court for relief from the automatic stay or it can simply wait to the case closed in about 3 to 4 months to continue with the foreclosure process. 

No. However, answering this question involves two distinct issues. One relates to the mortgage the other relates to the amount of equity in the home. 

 

If you are current on your mortgage you may keep making your mortgage payments to the secured creditor. This is true in chapter 7 and chapter 13. If you are behind on your mortgage you typically must file a chapter 13 bankruptcy which will allow you to catch up the past due amounts over a period of up to 5 years.  For the most part you must be able to afford the regular monthly payments; however, in some cases you may be able to lower your monthly payments by completely avoiding junior mortgages and equity lines if the value of the home is less than liens that are superior to the mortgage sought to be avoided. 

 

The second issue relates to the amount of equity that exists in the property.  The law sets limits on the amount of equity you may retain in property.  Determining the proper exemptions to use has become somewhat more complicated after passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”).  Generally, however, if you have lived in North Carolina for a period of 2 years, North Carolina’s exemptions apply and an individual may exempt $35,000 equity in a residence or $70,000, if both a husband and wife file bankruptcy.  If the property is not a residence the exemption is limited to $5,000 per debtor. There is, however, an exemption for North Carolina real estate that is potentially unlimited, known as “tenancy by the entireties.”   Entireties property is real estate jointly owned by a husband and wife which is located in North Carolina.  If there are no joint debts, entireties property is exempt from the claims of either spouse’s individual creditors, except for Federal taxes.  This exemption applies in bankruptcy and can protect real property with any amount of equity.     

 

If property exists that is not fully exempt, a chapter 13 may be suggested which would allow the payment of this excess equity over a period of up to 5 years, which the chapter 13 trustee will disburse to unsecured creditors. 

Yes. Once filed, a bankruptcy stops all collection activity, including repossessions. If the vehicle has already been repossessed, you generally have the right to redeem the vehicle under North Carolina law for 10 days or sometimes a little longer. Therefore, a chapter 13 bankruptcy filed within the time will allow you to have your vehicle returned in most cases. 

Yes, but you must act quickly. You generally have the right to redeem the vehicle under North Carolina law for 10 days. You must therefore file before the 10 days period expires.  If the creditor has not sold the vehicle within the 10 days, you may have a little longer to affect the return of the vehicle through bankruptcy. 

 

However, it is far better to file bankruptcy before your vehicle is repossessed.  If the car or truck has been repossessed before the bankruptcy cases has been filed, you will be without the vehicle while its return is being arranged.  Moreover, its return is often subject to conditions requiring prompt future payments, or payment of towing or storage charges. 

Yes. Once filed, a bankruptcy stops all collection activity, including lawsuits. However, bankruptcy will not stop criminal proceedings; and bankruptcy will not stop civil suits for the establishment of paternity, domestic violence, for the establishment or modification of an order for domestic support obligations or concerning child custody or visitation, or for dissolution of the marriage (except to the extent that such proceeding seeks to determine the division of property that is property of the bankruptcy estate).

Yes. Once filed, a bankruptcy stops all collection activity, including executions. 

Yes. Once filed, a bankruptcy stops all collection activity, including wage garnishments. 

In the typical case unsecured debts get paid pennies on the dollar, if they get paid anything at all. Generally, unsecured creditors only receive a significant dividend in the following situations: (1) there exists assets that are not fully exempt; (2) you are trying to protect a co-signer; or (3) you make above the median income and the means test requires that you pay a fixed amount to your unsecured creditors. 

 

Priority unsecured creditors (such as child support, alimony and most recent tax debt) will typically need to be paid over the length of your chapter 13 plan. Chapter 13 will also allow you to catch up on past due secured debts (such as house and car payments) over a period of up to 5 years. In many cases you can also pay off secured debt based on the value of the property securing the debt, rather than the amount owed to the creditor.   

 

There is considerable flexibility and complexity in formulating and proposing a chapter 13 plan which needs to be based on a client’s specific facts and goals. Please feel free to call today to discuss your options in this regard. (919) 875-8773. 

Yes, provided the unpaid liability is dischargeable in the bankruptcy case. Section 525 of the Bankruptcy Code provides that “a governmental unit may not deny, revoke, suspend or refuse to renew a license . . . [of] a person that is or has been a debtor . . . or has not paid a debt that is dischargeable in the case . . . . ” Therefore, filing any type of bankruptcy, including chapter 7 or chapter 13 will allow you to have your drivers license reinstated, unless the debt that caused the suspension is nondischargeable, such as a debt arising out of driving while under the influence. 

Filing bankruptcy does not stop criminal actions brought against you, including without limitation, criminal actions brought against you for having given someone a bad check. Payday loans are loans and are not bad checks notwithstanding what the payday lender may tell you and will not result in criminal charges. The creditor may be liable for damages for violation of the automatic stay if a bad check is reported after the bankruptcy case is filed, but not if the bad check is reported to the authorities before the case is filed. 

The reporting periods can be summarized as follows: 

 

Chapter 7 Bankruptcy (discharged granted) – 10 years from filing. 

 

Chapter 7 Bankruptcy (dismissed, no discharge) – 10 years from dismissal. 

 

Chapter 13 Bankruptcy (discharged granted) – 7 years from filing. 

 

Chapter 13 Bankruptcy (case dismissed, no discharge) – 7 years from dismissal. 

 

The Details:  The Fair Credit Reporting Act (“FCRA”) limits how long certain items are reported on your credit report.  Pursuant to the FCRA, a credit reporting agency will report and keep on their records a bankruptcy filing for a period of ten (10) years from the bankruptcy filing date. 15 USC. Sec. 1681c(a)(1).  Although the FCRA allows the reporting of all bankruptcies for 10 years, most credit report agencies only report chapter 13′ s for a period of 7 years from the filing. If your case is dismissed, without the granting of a discharged, it will be reported from the date the case is dismissed rather than from the filing date. 15 USC Sec. 1681c(d)(1). If you apply for credit or insurance of more than $150,000.00, or for a job with an annual income of $75,000.00 or more, credit reporting agencies may report bankruptcies, lawsuits, paid off tax liens, accounts sent for collection, criminal records, past due child support, or any other adverse information beyond the normal time limits. 15 USC Sec. 1681c(b)(1) – (3). In practice, however, credit reporting agencies often delete all items after 7 to 10 years. 

 

As odd as it may sound, bankruptcy may actually help you start building good credit better than just continuing to struggle to pay more debt than you can comfortably handle. This is so because bankruptcy will help you meet two of the most important components of a good credit score, namely making your payments on time (35% of your credit score) and not utilizing most of your available credit (30% of your credit score). 

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