Chapter 7 Bankruptcy

 

q       Chapter 7 bankruptcy lets you eliminate most debts in exchange for giving up property not protected by exemption laws.  Exempt properties are things you are can keep through the bankruptcy and after the case is completed.  Some of the major exemptions available to North Carolina residents.

o       Home: the first $10,000 in equity in a house used a your residence.  Married couples filing jointly can exempt up to $20,000 in equity in their residence.  People who have more equity than allowed by the exemption will often choose a Chapter 13 bankruptcy.

o       Car: The first $1500 in value of a car is exempt from creditors.  Most Chapter 7 filers can keep their cars provided they can continue regular payments.

o       Household goods: The first $3500 in household goods (furniture, clothing, etc.) is exempt from creditors.  Married couples filing jointly can exempt $7000 in household goods.

o       IRA’s and retirement plans

 

Author Mark Twain filed bankruptcy after an investment in a printing press failed

 

q       If you have exempt property a bankruptcy trustee sells it and distributes the money to your creditors. Any remaining unpaid debt is wiped out. If you don't have much property, you may get to keep what you have.  Most Chapter 7 filers are considered “no asset” cases so no property is turned over to the trustee. 

q       Some debts cannot be eliminated in Chapter 7 bankruptcy.  These include:

o       Child support

o       Alimony

o       Student loans

o       Recent taxes

q       Creditors must leave you alone: Filing a bankruptcy petition puts an automatic stay in effect.  Creditors who violate the stay by continuing to try to collect risk fines and contempt of court.

When Chapter 7 won’t help

·        You filed bankruptcy and got a discharge within the last 6 years

·        If a relative co-signed a loan (the creditor will be able to collect from your relative)

·        You are behind on your mortgage or car payments (the creditors will get permission to repossess)

·        You are facing foreclosure

·        You owe recent taxes that the IRS or state is trying to collect

Chapter 13 bankruptcy might help