When people in North Carolina file for a Chapter 13 bankruptcy, all creditor actions must stop. This allows filers to reorganize their finances into a repayment plan that last for three to five years. A lump-sum payment is made each month to a trustee who then makes payments to creditors. If the person follows the rules, any eligible remaining debt is discharged at the end of payment period. However, not all debts must be paid through this plan.
Paying existing debts
If a person is behind on the mortgage, that past-due amount must be paid through the trustee. Whether or not the mortgage must be paid through the plan after that point or can be paid directly depends on the rules of the jurisdiction. Car loans and other secured loans, or loans for which there is some type of collateral, are usually paid through the plan, but if the person petitions to pay them outside it and the creditors do not object, the court may grant it.
New debt
It is necessary to get approval from the bankruptcy court to take on new debts. These new debts have to be paid separately. However, if the case is converted to a Chapter 7, it may be possible to discharge the new debt.
People may fall into debt for many reasons, including a divorce, a job loss, or medical issues. Those who are struggling with debt might want to consult an attorney to discuss their options and whether they qualify for a Chapter 7 or a Chapter 13 bankruptcy. This is generally based on income. Some people may be concerned about how bankruptcy will affect their credit, but filing can give them a fresh financial start, and it is possible to rebuild credit after a bankruptcy.
