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Bankruptcy provides an escape from credit card debt

On Behalf of | Feb 11, 2021 | Chapter 7 Bankruptcy

Many North Carolina residents find themselves in unmanageable financial situations because they used credit cards to make ends meet during periods of economic hardship. Credit cards provide consumers with a convenient way to finance purchases, but they can be ruinously expensive if balances are not paid off quickly. When consumers are unable to make their monthly payments on time, lenders place their accounts in default and may sell whatever is owed for pennies on the dollar to a debt collection company.

Defaulting does not make debt go away

In addition to daily harassment from debt collectors, consumers with credit cards in default may be sued, have their wages garnished or liens placed on their homes. The missed payments leading up to a default can also cause credit scores to plummet. Consumers may try to reduce their monthly obligations by transferring revolving balances to cards with lower interest rates, but this may not be possible if they have failed to make payments and their credit scores have suffered.

Protecting assets with a bankruptcy

Filing for bankruptcy offers the chance of a fresh start and allows people to protect the assets they need to work and enjoy life. The bankruptcy exemptions in North Carolina protect up to $35,000 in home equity, $25,000 in college savings accounts, $3,500 in vehicle equity, $5,000 in personal property, $2,000 in professional books or tools and all tax-exempt retirement plans. If a North Carolina resident is 65 years of age or older when they file a bankruptcy, the homestead exemption is increased from $35,000 to $60,000.

The automatic stay

Putting an end to daily calls from collection agencies is another reason people choose to file Chapter 13 or Chapter 7 bankruptcies. Attorneys with debt relief experience could explain that an automatic stay is issued when a bankruptcy is filed. This is a court order that stops all collection efforts and halts any debt-related lawsuits or wage garnishments.


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