Nc bankruptcy law
As per Chapter 7, the trustees gather all the assets and sell those assets that are not exempt. After selling the assets, the trustee pays the debtor any exempted amount. The proceeds of the liquidation are distributed amongst the creditors. The trustee who oversees the distribution takes a commission. In this way, the debtor clears all the debts and gets a fresh start. Debts like student loans, some taxes, fraudulent debts, child support and alimony cannot be discharged under Chapter 7. Generally, a Chapter 7 bankruptcy file contains large credit card debt and unsecured bills. In most of the cases, this type of bankruptcy completely eliminates all the debts filed.
Some secured debts like those of a house or furniture or car can be kept by reaffirming those. For this, it is essential to sign a Reaffirmation agreement voluntarily. However, it is not possible to wipe the debt for six years. This means if the debtor decides to keep the furniture or car or house and reaffirms the debt, it is not possible to keep the debt again for six years. The debtor owes the debt and has to continue repayment as was being done before filing bankruptcy. For reaffirmation, it is essential to make it current i.e. if the debtor is three or four months behind, then these back payments must be paid before reaffirmation. It is possible to selectively reaffirm the debts i.e. the house and furniture may be retained, while the car and jewelry can be transported to the creditors.
Chapter 13
As per Chapter 13, a debtor offers a repayment plan of 3 to 5 years to the creditors, during which all or part of the debts would be repaid from the debtors future income. Chapter 13 can be used for prevention of a house foreclosure, paying back taxes, keeping valuable non-exempt property, making up missed car or mortgage payments, stopping interest from accruing on the tax debt. If the debtor adheres to the terms of the repayment plan, the entire dischargeable debt would be released at the end of the plan. There are many factors that decide the amount to be repaid. One of these is the debtors disposable income. The amount paid to creditors under the Chapter 13 plan has to be at least equal to that the creditors would have received in case the debtor would have filed the Chapter 7 plan. For a debtor to file a Chapter 13 bankruptcy there must be a regular source of income and some disposable income. Chapter 13 is used by debtors when they desire to retain secured assets like a home or a car. The debtor must have more equity in the secured assets that they can protect using the North Carolina bankruptcy exemptions.
Chapter 7 Vs chapter 13
Chapter 7 is liquidation while Chapter 13 is reorganization. Chapter 13 permits the debtor to make overdue payments with time and reinstate the original agreement. When a debtor has valuable nonexempt property and desires to retain it, Chapter 13 is a good option. Most of the people desire to eliminate the debt without repaying it. For them, Chapter 7 is a good option.
Other Articles
