What Are the Types of Bankruptcies in NC?
When debt gets out of hand, whether with personal finances or at your business, you may wonder what options are available to you. Understanding the different types of bankruptcies may offer answers.
Types of Individual (Consumer) Bankruptcy
When an individual or couple finds themselves overwhelmed with debt because of job loss, divorce, medical crisis, or other reasons, they should understand the three types of consumer bankruptcy in North Carolina. While bankruptcy is not the answer for everyone, it may be an option.
Chapter 7 Bankruptcy
One of the most common forms of bankruptcy protection is Chapter 7. Chapter 7 bankruptcy eliminates many debts that consumers owe. Certain debts, such as taxes, child support, and student loans are not discharged. There are income limits in Chapter 7, which your bankruptcy attorney can explain. When applying for bankruptcy protection, it is important to ensure an accurate record of all income, debts, and assets. Non-exempt property can be liquidated in chapter 7.
Chapter 13 Bankruptcy
Chapter 13 allows a debtor to reorganize their debt and pay monthly payments for no longer than 60 months. This option allows the debtor to retain their assets in exchange for repaying a portion or all of their debt. In some cases, some unsecured debt may be reduced depending on the debtor’s household income and assets. Secured claims can also be provided for. The reorganization plan is submitted by the debtor and approved by the court. The confirmation binds all parties.
Individual Chapter 11 Bankruptcy
When an individual or a couple has more debt than is allowed in Chapter 13, this may be the right bankruptcy option. This allows for debt restructuring.
Types of Bankruptcy for an LLC or Corporation
Business entities can begin struggling financially if cash flow is hampered. This could be due to market conditions, new competition, or seasonal changes in the business.
Chapter 7 Bankruptcy for an LLC or Corporation
Chapter 7 involves a bankruptcy trustee cataloging all assets and possibly liquidating them. No discharge of debts is entered in a Chapter 7 filed by an LLC or corporation.
Chapter 11 Bankruptcy
When a company has debt issues that can be fixed, Chapter 11 may be the right option. Chapter 11 allows a company to continue operating and seeks to get a reorganization plan confirmed by the Bankruptcy court. Often, by reducing costs, finding new sources of revenue, and temporarily postponing debt payments, a healthier, more profitable company is possible.
Which Chapter Is Right for Me?
Individuals and entity owners who are considering bankruptcy must carefully evaluate their options. In deciding which bankruptcy option is best, they must carefully evaluate their current and future income.
A means test is the first step in determining eligibility for individuals or couples considering Chapter 7 personal bankruptcy whose debts are primarily consumer in nature. For those who are not presumptively eligible, Chapter 11 or 13 personal bankruptcy may be the only option.
For entity owners, filing for bankruptcy laws may be more challenging. Chapter 7 often means the business’s assets are liquidated, and debts are paid from the proceeds. Chapter 11 allows the entity to continue operating and try to confirm a reorganization plan.
Contact an Experienced Bankruptcy Lawyer Today
If you are feeling the burden of high debt and are uncertain whether to file for protection under bankruptcy laws or which chapter is best under the circumstances, contact an experienced NC bankruptcy lawyer at Sasser Law Firm.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.
