Durham Bankruptcy Law Blog

Senior citizens in North Carolina and around the country are filing for bankruptcy in unprecedented numbers according to a recent study. Chapter 7 and Chapter 13 bankruptcies filed by Americans between 55 and 64 years of age have risen by 66% since 2016, and the number of retirees in the United States seeking debt relief has more than tripled. These were just two of the sobering statistics a University of Illinois professor discovered when he looked into the financial challenges faced by older Americans.

Most personal bankruptcies in the United States are filed to escape overwhelming medical debt, and this is especially true among older filers. The University of Illinois professor says that 60% of the American retirees who file bankruptcy petitions do so because they have health care bills that they are unable to pay, and many of these senior citizens only turn to debt relief after exhausting their savings.

The statute of limitations is the amount of time that creditors have to take legal action to recover an unpaid debt. Once the time period allowed by the statute of limitations has passed, debt collectors can still try to collect monies owed, but they cannot file lawsuits against delinquent borrowers or garnish their paychecks. In North Carolina, the statute of limitations for automobile loans, installment loans, credit cards and promissory notes is three years from the date of the last payment or charge.

What this means is that every payment made on a delinquent account resets the clock and restarts the statute of limitations. This is why North Carolina residents who are experiencing financial difficulties should consider their options carefully when deciding which bills to pay and which to allow to fall into arrears. It should also be noted that delinquent payments will usually remain on credit reports for several years after the statute of limitations has passed.

The decision of whether to file for bankruptcy in North Carolina can be a difficult one, and it turns on the facts of the case. Every debtor's situation is different; a certain amount of debt in one case might call for bankruptcy while debt restructuring might be a better option in another case. Among the first things to consider are the broad financials, income, expenses, assets and liabilities. It's also important to be aware that many creditors have little incentive to settle debts.

An examination of disposable income and outstanding debt levels may solve the question right away. If there is no way that a person can hope to pay down his or her debts, even after stripping expenses as far as possible, it may make sense to file for Chapter 7 or Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, the petitioner is required to give up all non-exempt assets and use the proceeds to pay off debts. Assets like a car, work tools and home equity may be exempt in some cases.

Most college students in North Carolina and around the country will be in debt to the tune of thousands of dollars when they enter the workplace, and many of them will find it extremely difficult to make their required monthly payments. The nation's bankruptcy code was revised in 2005 to make student loan debt nondischargeable in most bankruptcy cases, but there is an exception to this general rule when continuing to make payments would impose an undue hardship on the petitioner.

However, lawmakers chose to not clearly define what an 'undue hardship" is when they drafted the Bankruptcy Abuse Prevention and Consumer Protection Act, so deciding what the nebulous term actually means has been left to the courts. The Department of Education is working to develop a nationwide standard, but most courts currently apply what is referred to as the Brunner test to make these decisions. In 2016, the Fourth Circuit ruled that bankruptcy courts in North Carolina must apply the Brunner test.