North Carolina Legal Frequently Asked Questions (FAQs)
When you or a loved one is injured in an accident, no one hands you a pamphlet containing all of the information you need to understand your case. In this section we strive to answer the basic questions that everyone has in the time following a car accident, on-the-job injury, medical malpractice, abuse, or other accident.
If you don't find the answers to all of your North Carolina injury questions here, we encourage you to contact our Raleigh injury lawyers for answers to questions specific to your case. The consultation is free and confidential.
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What is Secured and Unsecured Debt?
Secured debt is any debt secured by property that your creditor can take if you fail to make your payments. Your mortgage is a secured debt and so is a car loan. This is called collateral. Lenders place a lien--which is a right to take back their property if you default--on secured debt. You do not own anything loaned to you until your debt is paid in full.
Unsecured debt is debt that is not secured by a property. This debt includes credit card bills, taxes, child support, or spousal support. Creditors cannot take anything from you in these cases because there is no asset attached to your loan. To incite you to pay your unsecured debt, creditors will have debt collectors call you. They may even take you to court, and they will report your unpaid loans the credit bureaus, which keep a record of your credit score. This will reflect poorly on your credit report.
If you are experiencing financial hardship, make sure to be consistent with your most important payments: secured debt. Otherwise, you risk losing your house. You can make the minimum payment on your unsecured loans. However, this means it will take you longer to pay them off, but it is better not to fall behind. Paying the minimum is better than paying nothing.
If I File for Chapter 7 Bankruptcy, Will My Unsecured Debt be Safe?
Debts that are not secured by collateral are considered unsecured debts A home or car are considered collateral. Chapter 7 takes care of credit card debt, medical bills, and gasoline card bills. So your unsecured debt will be safe if you file Chapter 7.
However, not all unsecured debts will be discharged if you file Chapter 7. Nolo.com states "some unsecured debt is nondischargeable." This means Chapter 7 will not wipe away these debts. Examples of these debts include child/spousal support, student loans, luxury debts, fraud, and taxes due within the past three years. If your debt does not fall into these categories, it will be discharged by the end of your bankruptcy case. For more information about Chapter 7 Bankruptcy, click here.
What is the "Cramdown" Rule?
If you have been paying a loan for more than 910 days, and if you file for Chapter 13 bankruptcy, the bank will allow you to receive some relief for that loan.
For example, if you have been paying your car loan for more than 910 days, not only will you be able to keep your car, you will no longer have to pay back the entirety of the loan. If you have been paying your car loan for this long, your car is no longer worth what you owe. You will only have to market value of your car. This is called the "cramdown" rule.
If One Spouse Files for Bankruptcy, What Will Happen?
Only having one spouse file for bankruptcy is more logical than filing as a couple in certain scenarios. There are a few things to keep in mind if only one of you plan to file.
The "Means Test" When Filing for Bankruptcy
The filing spouse must include the paperwork of the non-filing spouse's income. When filing for chapter 7, this information is required to see if the spouse's income qualifies the "means test." If the non-filing spouse does not pass the means test, the couple cannot file separately.
The person filing is more likely to pass the means test if the couple lives in separate households. The filing spouse must still provide both incomes; however, the filing spouse can list his or her living expenses, and they are more likely to pass the financial qualification test.
Filing For Bankruptcy Independently
If a couple is separated, the other spouse's income will not be required in the filing process.
If one spouse is filing, the other spouse may be asked to sign a waiver detailing their exemption rights. Exemption rights allow you to keep certain assets. If the other spouse needs to file for bankruptcy at a later date, the same exemptions will no longer be available.
If you are seeking an attorney for a divorce, contact Brent Adams & Associates today by filling out the contact form.
Do I Need a Minimum Amount of Debt to File?
There is no minimum amount of debt required in order for you to file for bankruptcy. Everyone's case is different.
If you file, your ability to pay back your creditors highly depends on your percentage of living expenses. For example, if you are unable to work, you will only pay back a small amount of your debt.
If you have a small amount of debt, consider these five factors before filing:
- How much do you owe? You may be able to work out new payment plans with your bank. Speak with an employee to look at your options. Bankruptcy will stay on your credit for 7-10 years, and if your amount of debt could be paid off with a new payment plan, this will not damage your credit score.
- Will bankruptcy eliminate the debt you owe? (Ex.: You cannot file for bankruptcy for student loans.)
- How long will repaying your debt take you?
- Do you owe a collection agency?
- How much will you spend in attorney and filing fees? Will those factors make filing for bankruptcy worth it?
Who is Eligible for Bankruptcy?
Almost anyone can file for bankruptcy; however, this is a situation that should not be taken lightly.
Someone eligible for bankruptcy must have:
- A permanent residence
- Own land or any type or property
- Or Own a business
- Filers must also complete a financial counseling course, but most filers are exempt from this because their case is too far gone to be saved.
Just because you are eligible to file for bankruptcy does not mean you will qualify to have any of your debt discharged. You should seek counsel from an attorney if you're qualified to file in order to find out what kind of relief you could receive.
If you would like to speak with a qualified expert, you can contact Brent Adams and Associates by calling 877-273-6823 or by clicking here. The initial consultation is free, and there is no obligation. See how much relief from your debt you could receive by filing for bankruptcy.
What is Joint Bankruptcy?
If you are married, you would both file a petition for joint bankruptcy. Your spouse is not required to file for bankruptcy with you. You can file by yourself. In some cases, this may be smarter. If one of you has a perfect credit score, there is no point in ruing that score with a joint bankruptcy claim.
However, if you are both in debt, filing joint bankruptcy will save you money because you will have once filing fee instead of two.
How can I remove debt from my credit report?
The bankruptcy court has no power regarding what goes on an individual's credit report. However, the law provides that bankruptcy filings are not permitted on credit reports ten years after the date bankruptcy was filed. Bad credit is removed within seven years.
Three major credit bureaus moderate debts that display on one's credit report: Equifax, Transunion and Experian. If you see an error on your credit report you must contact the credit bureaus directly to resolve. Provisions in the Fair Credit Reporting Act regulate how the credit bureaus operate.
According to the Eastern District Court of North Carolina U.S. Bankruptcy Court, "The larger credit reporting agencies belong to an organization called the Associated Credit Bureaus. The policy of the Associated Credit Bureaus is to remove chapter 11 and chapter 13 cases from the credit report after seven years to encourage debtors to file under these chapters."
Remember, not all debts are removed through bankruptcy. Learn more about the debts removed by bankruptcy.
What should I do if I am unable to make my Chapter 13 payment?
If you cannot make your Chapter 13 payment for a limited amount of time, contact the Chapter 13 Trustee and inform them of your situation. If the Trustee agrees, these payments can be made up over a certain amount of time.
If you are not capable of paying your Chapter 13 payments permanently, then your Trustee may be able to dismiss your case or have it transferred to another chapter. The Trustee may also seek to modify your payment plan.
What does it mean for my discharge to be denied versus my debt being declared nondischargeable?
If the court does not discharge all debts, the debtor is held legally responsible for all non-dischargeable debts. If a debt discharge is denied, a lawsuit must be filed. The person filing suit must prove that the debt being denied should not be denied, or the debt be declared nondischargeable. If none of the debts are declared dischargeable or a discharge is not withheld, then generally all of the debts will be discharged when the entry of the order is granted. Learn about debt categories in bankruptcy and exempt assets.
How do I decide which type of bankruptcy to file?
Not all individuals have the opportunity to pick the type of bankruptcy they will claim. An applicant's bankruptcy options hinge on which types they qualify for. First, all individuals must complete pre-bankruptcy credit counseling. During this time, folks may learn or decide they can effectively manage their debt without filing for bankruptcy. For others who still need help managing their debt, they will need to learn whether they qualify for Chapter 7 and/or Chapter 13. If they qualify for both, they have the opportunity to choose how they want to file. However, if they only qualify for one, then no decision will be necessary as that will be their only course of action.
Our Raleigh bankruptcy attorneys offer complimentary consultations where you can learn about filing options and qualifications. Chapter 7 imposes income limitations and Chapter 13 imposes debt limitations. Learn more about the differences between Chapter 7 and Chapter 13.
Can I choose the type of bankruptcy I want to file?
If you meet the requirements for Chapter 7 and Chapter 13 bankruptcy, then you may pick whichever way you want to file. If you only meet the criteria for one, then you must file for that particular type of bankruptcy if you choose to file.
Generally, folks who have substantial income will not qualify for Chapter 7. The income limits vary depending on the median income across the state. In North Carolina, the median income for a single earner was $41,590 as of May 2016. If a married couple carries joint debt and intends to file jointly for bankruptcy, the median income as of the same time period is $53,278. Those earning more than the state's median income will not qualify for Chapter 7. To check the current income levels provided by the U.S. Census Bureau, visit the Census Bureau Means Testing site and select your desired dates.
Individuals whose debt exceeds a certain amount will not qualify for Chapter 13. The debt limit qualifiers for Chapter 13 change every few years. As of this writing, individuals will not qualify if their secured debts are in excess of $1,149,925 and unsecured debts are in excess of $383,175. Learn about the differences between Chapter 7 and Chapter 13 bankruptcies.
What are the differences between Chapter 7 and Chapter 13?
Chapter 7 is referred to as “liquidation” bankruptcy because debtors typically lose a part of their property. Chapter 7 is filed by those who have no means of paying their debts. These applicants may lose many assets in order to pay off most of their debt.
Chapter 13 is known as “reorganization” bankruptcy because consumers still have to pay back a smaller sum of their debts. When filing for Chapter 13, applicants have a chance to reorganize their debt burden. They must organize a repayment plan and the court will decide how much debt must be repaid according to the applicant's income, amount of debt, and the value of property. Generally the repayment amount must be satisfied within 3-5 years.
Sometimes applicants will not have a choice in the kind of bankruptcy they file. Certain factors, like income thresholds, may mandate the type of bankruptcy the individual qualifies for.
Individuals facing unfortunate debt burdens can use bankruptcy to "start over" and rebuild on a stronger financial footing. For those who qualify (and our Raleigh bankruptcy lawyers are available for free case evaluations), they are often anxious to get the process started and eliminate their debts. Bankruptcy is not quick. There are pre-bankruptcy procedures that must be followed. Another reason applicants want to move forward quickly with bankruptcy is that they are concerned their assets will be taken away by debt collectors. Fortunately, some assets are shielded from creditors under North Carolina law. Learn about exempt property in North Carolina.
Will filing for bankruptcy in North Carolina remove all my debt?
Chapter 7 bankruptcy filings often require liquidations. This generally involves the sale of many of the applicant's possessions in order to pay for some of their debt. Filing for Chapter 13 bankruptcy does not require the applicant to sell their possessions, but they have to pay back a portion of the debts within three to five years.
Bankruptcy will help eliminate a portion of debt, like credit card bills or hospital bills in some cases, but alimony and taxes will not be discharged.
Student loans are another type of debt that cannot be taken away by filing for bankruptcy--in most cases. However, under special circumstances, student loans have been discharged. This notable 2013 student loan bankruptcy discharge is one example. In order to do this the applicant must prove extenuating circumstances, which is not a simple matter to prove.
If you're concerned about debt owed on a home, learn about how bankruptcy affects foreclosures.
What is an 'automatic stay' in bankruptcy?
An 'automatic stay' is a term used in bankruptcy proceedings that refers to a suspension in debt collection. An automatic stay is not permanent and it does not apply to all creditors. This process might help mitigate judgments, credit card debt, and some other areas of debt.
For creditors and collection parties where the automatic stay applies, it requires them to immediately cease debt collection activities. Even if you have not filed for bankruptcy, debt collectors must comply with federal laws like the Fair Debt Collection Practices Act. Bankruptcy attorney Brent Adams explains more about acceptable and non-acceptable collection actions in the video above.
An automatic stay occurs as soon as bankruptcy is filed. Of course, applying for bankruptcy and filing for bankruptcy are two separate things that do not occur immediately after the other. Also, the creditor might have the option to file a motion to 'lift the stay.' If this occurs, they can proceed with collection activities.
How does bankruptcy affect a home foreclosure?
Foreclosure in North Carolina and any part of the country is generally not a lightning speed process. Plus, homeowners might have options to delay foreclosure. Bankruptcy is also not an overnight procedure. First, bankruptcy applicants must complete mandatory credit counseling followed by additional steps before proceedings begin.
Two factors can affect whether or not bankruptcy can help prevent or stop foreclosure on a home. One is time, the other is the type of bankruptcy the applicant files. Filing Chapter 7 or Chapter 13 bankruptcy places what is called an 'automatic stay,' a term that means most creditors must suspend their collection practices. How far along in the foreclosure process is the potential bankruptcy applicant? Would there be sufficient time to begin a lengthy bankruptcy application? The answers to these questions are best discussed during a consultation with a bankruptcy attorney who can review your unique circumstances and advise how state and federal bankruptcy law applies to your particular case.
Sometimes homeowners are offered foreclosure alternatives from their bank/lender. Short sales, forbearance, and other options could be available to the homeowner.
Contact our bankruptcy attorneys in Raleigh to schedule a complimentary consultation. We will discuss your case and explain complicated legislation in simple terms you can understand so that you can confidently decide your next step. Bankruptcy attorney Brent Adams explains more about the details you need for starting the process in the video above.
I live in NC and have credit card debt. Can creditors call my employer about debts?
Federal and North Carolina state laws govern how credit card companies can communicate with you regarding debt collection. Creditors may only communicate with the debtor. If the bill collector calls the debtor at work, the debtor can immediately request that they stop calling their place of work.
If the debtor makes this request and the creditor continues to call, these creditors who contact a debtor's employer violate state and federal laws and could be liable for fines as a result. Depending on the violation, the debtor may be able to receive $1,000-$4,000 for each violation that the creditor has made. The debtor might also recover attorneys' fees as well.
Individuals who receive calls from creditors at work can simply tell them to stop calling. Sometimes that is not enough. Debtors can also send a written demand to cease calling to the credit card company. If the creditors continue to call, having documentation of the request can help build a strong case to pursue creditor violations.
Individuals with mounting credit card debt and other bills might consider filing for bankruptcy for debt relief. Contact our Raleigh bankruptcy lawyers with your questions and learn more about filing for bankruptcy in North Carolina.
What is the Fair Debt Collection Practices Act and how does it affect my North Carolina bankruptcy case?
Individuals in North Carolina who file for bankruptcy have protections under state and federal law. Bankruptcy applicants should educate themselves on their rights under these laws. For example, the Fair Debt Collection Practices Act (FDCPA) is enforced by the Federal Trade Commission and offers protections to consumers who experience unfair practices. Although this Act is a lengthy piece of legislation, it is actually one part that was added to another Act: The Consumer Credit Protection Act (CCPA). The CCPA is regulated through the United States Department of Labor.
Items included in the FDCPA that might be helpful to bankruptcy applicants include:
- Includes definitions of harassment and abusive debt collection practices
- Prohibits bill collectors from knowingly contacting employers of debtors regarding outstanding payments
- Rules regarding communication, for example - if a collector was notified and given the debtor's attorney information, the collector should only correspond with the attorney from that point forward
Many other conditions are included in the Act as well. If you are navigating bankruptcy in North Carolina you have likely had the experience of receiving a phone call from a bill collector. Bill collectors who are found in violation of federal laws might owe debtors $1,000 per call that included a violation. Victims in North Carolina might be eligible for additional penalties on the state level.
Curious if the treatment you are receiving from debt collection services is illegal? Our bankruptcy attorneys in Raleigh and Cary offer confidential and complimentary case evaluations.