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.
If the person decides to try to negotiate a settlement with creditors, another consideration is tax consequences. In many cases, any debt that is written off by the creditor as part of a settlement is thereafter taxable by the government as income. If the debt is discharged as a result of a bankruptcy, it is not treated as taxable income.
People in North Carolina who are struggling to pay their debts might want to schedule a meeting with a lawyer. A lawyer who practices bankruptcy law might help by examining the client’s financial situation and suggesting debt reduction or debt elimination options. A lawyer may help the client organize his or her assets in preparation for filing or draft and file the bankruptcy petition to begin the process.