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What is a
Chapter 7 Bankruptcy?
Chapter 7 is the most common form of bankruptcy. It
is also the simplest to file. In a Chapter 7
bankruptcy, you will not repay many of your debts,
and your creditors will be forbidden to attempt
collection from you.
Unsecured debts such as credit cards, medical bills,
personal signature loans and all other loans and
debts that are not secured by collateral are
generally discharged (meaning gone forever!) in a
Chapter 7 bankruptcy.
Certain debts are not dischargeable, including any
debt that is not listed in your schedule of
creditors, certain taxes, alimony, child support,
criminal debts, student loans, and a few others. We
can help you to determine whether or not a debt will
be eligible for discharge.
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What is
a Chapter 13 Bankruptcy?
Chapter 13 is also known as a reorganization or
consolidation bankruptcy, because your debts are
reorganized into a payment plan over 3 to 5 years.
At the completion of the Chapter 13 plan, your debts
will be discharged, much like in the Chapter 7.
People with problems with secured debt are
frequently better off filing a Chapter 13 case than
a Chapter 7 case because the Chapter 13 will allow
the debtor to pay off the past-due secured debt over
time. Chapter 13 allows you to stop the foreclosure
of your home or repossession of your car and get
caught up on the past-due payments over a period of
years, rather than all at once. Once your Chapter 13
case has been filed, you will resume making your
future mortgage payments directly to the mortgage
company, but your past-due mortgage payments, your
car, and other debts will be paid through your
Chapter 13 case.
In Chapter 13, the automatic stay also protects
people other than the debtor who are “co-debtors.”
Co-debtors are people who also have an obligation to
pay the same debt as the debtor. That includes
people who have guaranteed or co-signed the debt for
the debtor.
Certain debts that would not be dischargeable in a
Chapter 7 might be handled in a Chapter 13. We will
advise you on whether Chapter 13 would be
appropriate for you, depending on your income,
assets, and type of debts.
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Do I Get
To Keep My Property?
You are entitled to keep a generous amount of
your belongings when filing bankruptcy. North
Carolina law now provides higher personal
exemptions--items that are protected from seizure by
your creditors.
You will be allowed to keep a certain amount,
usually all, of your household goods with a current
market value of $5,000 per spouse, plus $1,000 per
child. Other essential items (see below) may also be
protected if they fall within the exemption
guidelines.
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Can I Keep My
House?
North Carolina law allows each spouse or individual
to keep $18,500 equity in a homestead. A homestead
is defined as your personal residence (mobile home
or house plus land) that you are living in at the
time of the bankruptcy filing. Equity is determined
by subtracting the amount that you owe on your
mortgage(s) from the fair market value of your home.
If your home equity does not exceed $18,500 ($37,000
for married couple and many widowed spouses) you
should not have a problem keeping your home in a
Chapter 7, as long as you are current on your house
payments both at the time of filing and also in
subsequent months. If your equity exceeds the
allowed exemption or if you are behind in your
payments, a Chapter 13 might allow you to save your
home.
The automatic stay protects you from foreclosure of
your house during the time your bankruptcy case is
open. However, if your payments fall behind after
filing, the bank may ask for court permission to
lift the automatic stay and begin foreclosure
proceedings
To help determine the value of your home, review any
recent appraisals of your home, or check with your
county tax department for the current tax value
assessment of your real property.
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Can I Keep My
Vehicle(s)?
North Carolina state law allows each individual to
keep $3,500 equity in a motor vehicle. To determine
the amount of equity you have, we will need an
accurate current RETAIL market value of all of your
vehicles as well as the payoff amount. You may
obtain the retail value of your vehicle online for
free at
www.nadaguides.com -- If your equity exceeds the
$3,500 mark, other exemptions might allow you to
protect up to $8,500 in your vehicle equity.
If you have a loan on your vehicle, you MUST keep
the payments current during and after the bankruptcy
to avoid repossession.
If your car is "upside down," meaning you owe more
than it's worth, we recommend that you look into the
possibility of surrendering the vehicle, which
allows you to get out from under that crushing
monthly debt and purchase or finance a less
expensive car after bankruptcy. Another possibility
is to “redeem” the vehicle by paying the current
retail value of the vehicle, and the remaining loan
balance would be discharged. We may be able to
assist you in finding a lender that will give you a
new loan to pay this redemption amount to your
existing lender, which could save you thousands of
dollars compared to your current vehicle loan.
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Will
I Lose My Retirement Savings?
Most retirement savings plans are protected by the
Employee Retirement Income Security Act (ERISA), and
are fully protected in bankruptcy. We can help you
determine whether your specific retirement account
will be protected in bankruptcy so you can keep the
savings intact for your retirement. Also, Individual
Retirement Accounts (IRAs) are generally fully
protected in bankruptcy.
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When Will The Harassing Phone Calls From Creditors
Stop?
The automatic stay goes into effect the moment your
bankruptcy petition is filed. Once our office has
prepared your bankruptcy petition and you have
thoroughly reviewed and signed it, your bankruptcy
petition will be filed electronically with the
bankruptcy court, meaning that we can get a case
number instantly. At this point, creditors must stop
contact with you, including telephone calls, letters
and all legal actions. You and your creditors will
receive an official notice from the United States
Bankruptcy Court.
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Will My Bankruptcy Filing Be Published In My Local
Newspaper?
A list of bankruptcy filings is not published in the
newspaper here in our local area. However,
bankruptcy information is part of the public record,
just like state court proceedings. Bankruptcy
matters are handled in federal court, with documents
filed with the Clerk of the United States Bankruptcy
Court in either Charlotte or Asheville. Depending
upon which county you live in, your court appearance
will be held at the federal courthouse in
Wilkesboro, Asheville, or Shelby.
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Will I
Ever Get Credit Again?
Yes, a bankruptcy can actually clean up your credit
report in the sense that your credit report will
show zero balances owed to your unsecured creditors,
rather than the tens of thousands of dollars that
you may currently owe, and may reflect better than
repossessions, foreclosures or even late payments.
Bankruptcy will typically improve your
debt-to-income-ratio, which is an important factor
that many creditors consider when extending new
credit. Although a bankruptcy can remain on your
credit report for up to 10 years, most people resume
normal credit activities immediately after receiving
their discharge. The interest rates may not be
prime, and some waiting periods may apply, but you
can begin re-establishing your credit immediately,
as long as you stay current on your payments.
However, we will counsel you to change your spending
habits to get away from dependence on credit and
avoid the credit trap in the future.
For articles, resources, and support to help you
responsibly establish credit after bankruptcy, visit
www.lifeafterbankruptcy.com – a web site by
Stephen Snyder, Founder of the After Bankruptcy
Foundation and author of Credit After Bankruptcy.
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Here are the Top 16 Myths
your creditors want you to believe...and the reason
why every one of them is NOT TRUE.
Myth 1: There's no more bankruptcy (or it's
too late to file).
NOT TRUE. In fact...nothing could be further from
the truth. Sure you heard it in the press, but it's
just not true. The news media overcooked the whole
story. The truth is that you can do almost
everything under the NEW law that you could do under
the OLD law. In some ways, the new law actually
increased the benefits of filing bankruptcy. Call us
now to find out more.
Myth 2: Everyone will know you have filed for
bankruptcy.
Unless you're a prominent person or a major
corporation and the filing is picked up by the
media, the chances are very good that the only
people who will know about a filing are your
creditors and the people who you tell. While it's
true that your bankruptcy is a matter of public
record, the number of filings is so massive, that
unless someone is specifically trying to track down
information on you, there is almost no likelihood
that anyone will even know you filed.
However...telling someone that someone else filed
bankruptcy is good gossip...just like telling
someone you heard so-and-so is getting a divorce.
So...if you don't want everyone you know to know you
filed bankruptcy....you need to keep the information
to yourself. As for newspapers...our experience is
that papers in this local area don't include
information about local people who filed
bankruptcy.... and even if they did...think about
it....who would be interested enough to read that
stuff.
Myth 3: You will lose everything you have.
Nothing could be further from the truth. The fact
is....most people who file bankruptcy don't lose
anything.
First....while laws vary from state to state, every
state has exemptions that protect certain kinds of
property. Using North Carolina as an
example.....there are exemptions to protect such
things as your house, your car, your truck,
household goods and furnishings, IRAs, retirement
plans, the cash value in life insurance, wages, and
personal injury claims. There is even a "wildcard"
exemption of $5,000 per person that can be applied
wherever you want it. In those rarer situations
where you have more property than can be protected
by available exemptions...there is Chapter 13. In
Chapter 13...you can even keep this property by
paying a higher Chapter 13 plan payment.
Second....filing bankruptcy does not generally wipe
out liens. Therefore...if you want to keep a car,
truck, home or business equipment that serves as
collateral for a loan....you need to keep paying on
the debt. If you make these payments and have
exemptions to cover any value above what is
owed....you can rest assured you will be able to
keep these items.
Myth 4: You will never be able to own
anything again.
A surprising number of people believe this...but
this is completely false. In the future...you can
buy, own and possess whatever you can afford.
Myth 5: You will never get credit again.
Quite the contrary. Filing bankruptcy gets rid of
debt....and getting rid of debt puts you in a
position to handle more credit....and this makes you
look more attractive to would-be lenders. In our
experience.....unfortunately....it won't be long
before you're getting credit card offers again. We
say "unfortunately" because we don't want you to get
right back in debt again. At first...the would-be
lenders will want more money down and will want to
charge you higher interest rates. However....over
time....if you are careful, and keep your job, and
start saving money, and pay your bills, and do
things that will put good marks on your credit
report....the quality of your credit will get better
and better. Generally...in our experience...if a
client has not re-established good credit in 2 to 4
years...sufficient to buy a car or even a
house....it's not because they filed bankruptcy. It
generally means that something else has happened
after the bankruptcy to hurt their credit.
Myth 6: Filing bankruptcy will hurt your
credit for 10 years.
Not true. You are getting 2 completely different
concepts confused with each other. You are getting
the fact that bankruptcy is reported on your credit
report for up to 10 years mixed up with the effect
that reporting will have on your credit. Just
because something is reported on your credit report
does NOT necessarily mean it will have a negative
effect on your credit standing.
First...let's get one thing out in the open. By the
time you need to make an appointment to see a
bankruptcy attorney.....your credit is already
messed up or maxed out...or both. This being the
case....you have no credit for bankruptcy to hurt.
Furthermore...as mentioned above...in our
experience...if you have not re-established good
credit in 2 to 4 years after you file
bankruptcy.....most likely....it has nothing to do
with the fact that you....once upon a time....filed
bankruptcy...and it certainly has absolutely nothing
to do with the fact that your credit history still
shows an old bankruptcy.
Myth 7: If you're married...both you and your
spouse have to file for bankruptcy.
Not true. In many cases...where both husband and
wife have a lot of debt....it makes sense and saves
money for them to both file....but it is never a
requirement under the law. We have many cases where
only one spouse has filed. The good news is that
generally....if it makes sense for both spouses to
file together....they can both file for the price of
one filing.
Myth 8: It's really hard to file for
bankruptcy.
No....it's not....at least not in the hands of an
experienced bankruptcy attorney. In the hands of an
experienced bankruptcy attorney...filing bankruptcy
is easy. The decision to file may be hard...but once
the decision is made...the filing part is easy.
Myth 9: Only deadbeats file for bankruptcy.
Not true. Most of the people who file bankruptcy are
good, honest, hard-working people...just like
you....who file as a last resort....after months or
years struggling to pay the bills that are left over
from some life-changing experience, such as a
divorce, the loss of a job, a failed business
venture, a serious illness, or some family
emergency...or because they honestly and mistakenly
fell into debt at a young age before they knew
better...before they knew anything about budgeting
or how to manage money.
Myth 10: Filing bankruptcy means you're a bad
person.
Not true. There's a reason over 1,000,000 Americans
file bankruptcy each year...and it's not because
they're bad people. Lots of good, honest,
hard-working people fall on hard times. Let's face
it....life can be brutal....and sometimes...the
money's just not there. The bankruptcy laws were
created with this in mind...to make sure you have a
way....if need be....to get free from the burden of
debt...so that you...and your family....can have a
second chance at a "fresh start".
Myth 11: Filing for bankruptcy will hurt your
credit.
That's not true. Think about it. As mentioned in
Myth #6 above, by the time you come to a bankruptcy
attorney....your credit is already either messed up
or maxed out. And if it's already messed up or maxed
out....how can bankruptcy hurt it?
The big surprise for our clients is when we tell
them that filing bankruptcy can actually help them
re-build their credit. Bankruptcy gets rid of
debt....and getting rid of debt puts you in a better
position to handle new credit....if only someone
will give it to you. Therefore....bankruptcy is the
first step in the process of re-building your
credit.
Myth 12: Even if you file for bankruptcy,
creditors will still harass you and your family.
This is NOT true. In fact, nothing could be further
from the truth. The minute you file bankruptcy, the
Bankruptcy Court issues an order telling all of your
creditors to leave you alone. No more phone calls.
No more collection letters. No more lawsuits. No
repossessions. No foreclosures. Nothing. This order
has a name. It is called the "automatic stay"; and
it is issued pursuant to 11 United States Code,
Section 362. The automatic stay protects you from
any and all collection actions. After you file
bankruptcy, the creditor is not even allowed to talk
to you. In addition, the creditor must stop any
collection attempts already started. The automatic
stay is very powerful, and puts the full weight of
the United States Courts to work for you, to make
sure your creditors leave you alone. If a creditor
violates the automatic stay, you have the right to
bring the creditor before the Court for Contempt of
Court, and to be compensated accordingly. Bankruptcy
Court Judges do not take kindly to creditors who
ignore the automatic stay, and these Judges have
been known to punish creditors severely. Very
simply, once you file for bankruptcy, creditors must
leave you alone or suffer the consequences.
Myth 13: If you file for bankruptcy, it may
cause more family troubles and may even lead to
divorce.
This is NOT true. Usually, it works just the
opposite. Filing bankruptcy is not the problem. The
problem is not being able to pay your bills. All
good, honest, hard-working people feel a strong need
to pay their bills, and not being able to do so
causes them to feel tremendous stress. Unless you do
something to relieve this stress, the stress can
quickly build to the breaking point....the marriage
breaking point. Bankruptcy is designed to get you
out from under the burden of debt, to protect your
property and to lower your stress level. If your
experience is like that of other couples, you will
find that filing bankruptcy... and lowering the
stress level.... can be a crucial first step in
bringing the love and caring back into your
relationship....which.....in turn.....gives your
marriage a fighting chance.
Myth 14: You can't get rid of back taxes
through bankruptcy.
We get rid of old "income" taxes for our clients all
the time. By "old"...I mean income taxes more than 3
years old. Under the law...there are 3 or 4
qualifications that have to be met....but once these
are met....these taxes are gone. Please note: Filing
bankruptcy does NOT get rid of withholding or sales
taxes...no matter how old they are. Also, tax liens
are not discharged in a Chapter 7 bankruptcy.
Myth 15: You can only file once for
bankruptcy protection.
The truth is....you can only file for a Chapter 7
bankruptcy once every 8 years....but after 8
years...if need be...you can file again. As for
filing a case under Chapter 13 of the Bankruptcy
Code....there is no 8 year restriction.
Hopefully...however...you will never need to file
more than one bankruptcy.
Myth 16: You can pick and choose which debts
and property to list in your bankruptcy.
I'm sorry...but you can't. Doing so would be against
the law. Under the law...when you file
bankruptcy...you have to list ALL your property and
ALL your debts. Most people want to leave out a debt
because it is their intent to keep paying on it. The
good news....is that you can achieve the same goal,
even though you have to list the debt. If you want
to keep paying on a debt...after bankruptcy....you
can. After bankruptcy....you can go back and pay
anybody you want. In fact...after you file
bankruptcy....there are some debts you have to keep
paying on. For instance....if you have a car, truck
or house loan....even though you list the debt in
your bankruptcy....if you want to keep the car,
truck or house....you have to keep paying on the
debt. More importantly....you need to know this: As
long as you stay current on the loan...and keep the
property properly insured....you are protected under
the law .... and you get to keep the
property....because...under the law...the creditor
is stuck with you and can't do anything about it.
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WHAT IS THIS NEW LAW?
The new bankruptcy laws that went into effect in
October 2005 still offer good protection for
financially challenged families in North Carolina.
The bankruptcy laws have been through many similar
reforms over the years, but remain a strong critical
option when payments on debts are just too high in
proportion to income. Attorney Rod A. Vujovic and
his staff have attended many bankruptcy seminars and
continuing legal education classes in order to stay
updated on the latest developments in consumer
bankruptcy law, so we can continue giving our
clients a fresh new start through bankruptcy.
Just when Congress revised the bankruptcy laws to
prevent abuse by those able to pay their debts, our
North Carolina legislature raised the amounts you
will be allowed to claim as exempt property in your
bankruptcy. That means that you will be able to
retain more equity in your house, vehicle, and other
property than before the new law. For example, under
the old law you would not be able to file a Chapter
7 bankruptcy without losing your house if the equity
exceeded $10,000 per spouse. Under the new
exemptions, a full $18,500 per spouse of home equity
would be protected. In many cases, a widowed spouse
can protect up to $37,000 in home equity. For your
car, each spouse can protect $3,500 of equity, up
from only $1,500 per person before. In addition to
these and other exemptions, there is a special "wild
card" exemption that may allow each spouse to
protect $5,000 in any property, including any extra
value in your car. There is even an additional
$5,000 exemption per spouse, and an additional
$1,000 per dependant, that can be used to protect
"household goods". If the equity in any of your
property exceeds these North Carolina exemption
amounts, you might be able to file Chapter 13
bankruptcy and still keep your property. We will
review your individual situation and advise you as
to your best option.
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SOME
BANKRUPTCY LAW REQUIREMENTS
Means (Income) Testing
The 2005 revisions to the Bankruptcy Code have
created an income-based test for measuring a
debtor's ability to repay debts. Under the means
test, those with insufficient income in proportion
to their debts can still file a Chapter 7
bankruptcy, which erases your unsecured debts
entirely under most circumstances. The means test
compares the debtor’s excess monthly income to the
amount of unsecured debt to determine how much a
debtor could repay to creditors if he were in a
Chapter 13. Because this calculation is hypothetical
and does not necessarily reflect the debtor’s true
financial condition, a debtor who appears to be able
to repay the minimum portion of his debts but who,
in reality, cannot, may be permitted to stay in a
Chapter 7 case. Unfortunately, the means test is
more complicated than we can explain well here.
Credit Counseling
The new law requires credit counseling before and
after the case is filed. Our firm has investigated
the least expensive and most convenient methods to
fulfill this requirement, which includes online and
telephone options available in the comfort of your
own home and on your schedule. We will help you
through this process as part of our program.
Disclosures
When you come to our office, we will give you some
documents to read explaining the types of
bankruptcies available and some of the relevant
legal provisions required by the United States
Bankruptcy Code. You will be asked to sign a
statement that you have read and understand the
disclosures. We will also sign an agreement with you
regarding our representation duties and fees. Some
documents will be required before we can file your
case with the bankruptcy court, such as paycheck
stubs, tax returns, real estate deeds, car titles,
etc. (we will give you a checklist of required
documents).
Rod A. Vujovic, Attorney at Law, PA is a federally
designated Debt Relief agency, assisting consumers
seeking relief under the United States Bankruptcy
Code. Attorney Rod A. Vujovic is a member of the
North Carolina Bar Association Bankruptcy Section
and the National Association of Consumer Bankruptcy
Attorneys (NACBA), which enables him to stay updated
on the latest developments in consumer bankruptcy
law in North Carolina and throughout the United
States.
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Other Useful Links
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If you have any
questions or would like more information, please
contact our Boone office at 828-262-0500, our
Hickory office at 828-327-2240,
email
us, or use our online request form. |
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