People in North Carolina struggling due to mounting debt or declining income may consider bankruptcy as a potential solution. A personal bankruptcy filing can reduce an individual’s monthly financial obligations or even eliminate the need to pay certain debts.
Many people find the prospect of bankruptcy intimidating or overwhelming, especially if they aren’t sure about which type to pursue or what debts they can eliminate. Learning more about the bankruptcy process can help those concerned about their finances make informed decisions.
Especially for those with overwhelming credit card balances or staggering medical debts, filing for bankruptcy in North Carolina may be the best possible source of financial relief.
What debts can people discharge?
Bankruptcy rules limit the debts that are eligible for discharge at the end of a successful filing. Generally speaking, only non-priority, unsecured debts are eligible for discharge in a personal bankruptcy filing.
Costly payday loans, credit card balances and medical debts are typically unsecured debts that people can eliminate through bankruptcy. Secured debts such as mortgages, priority debts such as child support and judgments from lawsuits are among the debts that people may not be able to fully eliminate with a bankruptcy filing.
The difference between Chapter 7 and Chapter 13 proceedings
Filers generally need to choose between a Chapter 7 or a Chapter 13 case. Chapter 7 bankruptcy allows for a relatively rapid discharge for those who can pass the North Carolina means test.
Individuals and married couples with an adjusted income that is below the state median for their household size can potentially complete a Chapter 7 bankruptcy in a few months. They may be subject to asset liquidation requirements if they have more property than they can exempt, but most people do not liquidate any assets.
Chapter 13 bankruptcy is a substantially longer process that requires a repayment plan. After negotiating arrangements with the court-appointed trustee and creditor representatives, Chapter 13 filers make one monthly payment to the trustee, who then distributes funds to each of their creditors as outlined in the plan.
Medical debts, payday loans and credit card debts are among the lowest priority financial obligations in a Chapter 13 filing. Any remaining balance due at the end of the repayment period is eligible for discharge. A Chapter 13 bankruptcy provides an opportunity to renegotiate specific debts, possibly by modifying an underlying loan. It also allows the filer to reduce the total debt they owe overall.
Discussing options with a North Carolina bankruptcy attorney can help people evaluate both forms of bankruptcy and determine what debts they can discharge.
