A bankruptcy blog containing useful information for anyone considering a Charlotte bankruptcy attorney.

Bankruptcy is not a sign of failure. Bankruptcy is not an admission of giving up. In fact, when you decide you’re going to file a bankruptcy—in North Carolina or anywhere else—you’re taking control of your situation. So, if bankruptcy isn’t these things, then what is it?

What Bankruptcy Really Is

Bankruptcy is relief. Bankruptcy is an agreement between you and your creditors. And for once you have some control over the terms. The reason you have control is that you have rights in bankruptcy, granted under the federal bankruptcy code. They entitle you to relief in exchange for openness and honesty about your financial situation. If you have nothing to hide, you have a lot to gain.

Why Bankruptcy

I start most conversations with my clients by letting them know my goal is not for them to file bankruptcy. My goal is for them to get relief and to get back on track financially. Quite often bankruptcy makes sense as the most effective tool to accomplish this goal. It’s much more powerful than debt settlement and in my opinion it’s a more FAIR arrangement. After all, most clients have been paying their creditors faithfully for years before filing, only to barely make a dent in what is owed.

What About My Creditors

It’s amazing how many clients feel obligated toward their creditors. That’s because they are good people who want to live up to their promises. In this case, the promise to repay a loan or a debt. The fact is, when your creditor initially loans money, they are aware a certain percentage of those loans will not be paid back. And they build it into their profit model. Your creditors will be fine. Bankruptcy is a choice to shift the focus from your creditors to yourself and your family. What could be more important than that?

Chapter 7? Chapter 13? Do I Even Qualify?

A Chapter 7 bankruptcy is a liquidation of assets which are then distributed to creditors. The good news is it’s very rare in my experience to actually have any assets liquidated. The bankruptcy code provides protections or “exemptions” for vehicles, homes, household goods, business “tools of the trade,” and other items. Typically, clients can protect all of their belongings when filing a Chapter 7.

A Chapter 13 bankruptcy is a good option for clients who have too many assets to entirely protect, or too much income to file a Chapter 7. It represents a partial repayment to creditors and strikes a balance between having the ability to pay SOMETHING, but not having the ability to pay what creditors are demanding.

Finding A Bankruptcy Attorney

The key to a successful relationship with a bankruptcy attorney is to find someone who is available, knowledgeable, and understanding of your situation and your goals. Bankruptcy attorneys often break the stereotype we typically hold of attorneys. They practice bankruptcy law because they feel like they are helping their clients and they can help those clients experience immediate relief and a higher quality of life—all by following the rules of the bankruptcy code. Call 704.749.7747 today to find out more about bankruptcy and your options, or to get a referral to a great bankruptcy attorney in your area.

There are many types of debt and many stages of relationships that exist between debtors and creditors. When a creditor in North Carolina obtains a judgment or judgment lien against a debtor, that lien will attach to certain property owned by the debtor.

Filing Before Judgment

Ideally, you file bankruptcy before a debt goes to judgment. If you’ve received notice of a lawsuit which has not yet resulted in a judgment, it’s not too late. By filing the bankruptcy prior to judgment, if the debt is dischargeable, it is included in the bankruptcy petition and will no longer present a problem.

Filing After Judgment

There’s good news. Even if a judgment is already recorded, the filing of the bankruptcy will discharge the debt associated with the judgment, ending personal liability for the debt. What remains in this situation is a judgment which can still attach to property. For example, in this situation, if you own a home prior to filing bankruptcy, the filing will eliminate your personal liability on the debt. But, when you go to sell your home (if you do so before the typical 10 year expiration on the judgment), you’ll have to pay the judgment from the proceeds.

If you purchase property after the bankruptcy, even though the judgment still exists of record, the bankruptcy will prevent the judgment from “attaching” to that property—i.e. it will not cause a problem for you.

A Solution: Avoiding Judgment Liens

While judgments represent potential problems for clients who file, one solution is to have your bankruptcy attorney file a motion under bankruptcy code section 522(f)(1)(a) to avoid the judgment. Depending upon the circumstances, the lien may be entirely avoided or partially avoided. This means that the filing of the bankruptcy disposes of the personal liability, and the motion mentioned above disposes of any additional liability.

A Formula For Determining Avoidability

1. Add all existing liens, including judgment

2. Add applicable exemptions ($35,000 for homestead, for example)

3. Compare to FMV of property (home)

4. The judgment can be avoided to the extent that (Liens + Exemptions) > FMV

  • For Example: Assume a home is worth 100k. There is a mortgage for 60k and a judgment for 20k. The applicable bankruptcy exemption for homes in North Carolina bankruptcy is 35k.
  • (60k + 20k + 35k) = 105k.
  • The home is only worth 100k, which is 5k less than the total items above. In this case, the 20k judgment can be partially avoided and will go from 20k to 15k.
  • IF the 105k total above had been 120k, the entire judgment of 20k could be avoided.

It’s your bankruptcy attorney’s job to understand the rules of bankruptcy and take advantage of all possibilities to discharge debt for you. Reach out and make a phone call today to find out your options. Call 704.749.7747 for a free phone consultation today.

When you file a bankruptcy petition for Chapter 7 in Charlotte, NC (The Western District of NC), you state your intention as to certain property. This includes homes and vehicles with existing loans, leases, and even cell phone contracts. In most cases, you have a choice as to whether to turn over the property in question—which relieves you of the debt obligation—or, keep the property and continue paying on the loan or contract.

Statement Of Intention

The bankruptcy petition has a “Statement of Intention” which my clients and I discuss at length when preparing to file. This statement of intention offers a few options for the client regarding the property in question. Section 521(a)(2) of the bankruptcy code requires filing of this statement by the client within thirty days of filing the bankruptcy petition.

Putting The Creditor On Notice

Practically speaking, the Statement of Intention puts individual creditors on notice as to what the client plans to do with the property. The creditor or landlord has a contract with the client and of course wants to know how the bankruptcy will affect them. When a client checks the “Reaffirm” option on the Statement of Intention regarding a vehicle for example, the lender on the vehicle knows that even though the client is filing bankruptcy, she plans to keep her car and continue making payments.

A Smooth Bankruptcy Process For You And Your Family

In most cases, subject to an analysis of the value of the property vs. the existing loan on the property, clients can continue to possess and use property they are willing to continue making payments on—the bankruptcy process moves forward and the vehicle or lease arrangement with the landlord goes unaffected.

Make A Phone Call

Bankruptcy attorneys make it their job to comfort clients as to every aspect of the process and how it will affect their lives in both the short and long-term. Call today if you’d like to get more information and better understand your options. 704.749.7747.

The fear of losing a car in bankruptcy is just one more myth about bankruptcy that continues to keep people in need, from finding out about their options. While not every Charlotte bankruptcy client of mine can keep their vehicle in a Chapter 7, the chance is extremely high that you can. If you can’t keep your car in a Chapter 7, we can always consider a Chapter 13 filing to accomplish the goal.

Federal And State Exemptions Explained

The bankruptcy code allows individuals and married couples to protect equity in one or more vehicles (one per person). Under 11 USC Section 522(d)(2), which is the Federal exemption, each filing individual can protect up to $2,400 in equity. The North Carolina exemption is more liberal and allows $3,500 in equity to be protected by each individual. Here’s the easy method for determining your equity in your vehicle:

Current Blue Book Value – Current Loan Balance = Equity

How This Works In Bankruptcy

Essentially, if you desire to keep you car and file bankruptcy, and if your equity is less than the allowable Federal or North Carolina exemption, we make that declaration on the bankruptcy petition and the car is excluded from the bankruptcy estate—the court can’t touch it.

You continue to make your monthly car payments and drive your car, while you move forward with the bankruptcy case.

What If I Have Too Much Equity?

If your equity in the car exceeds the exemptions, there are other options. Namely, we can use what is commonly known as the “Wild Card” exemption of $5,000 and apply it to cover the extra equity, giving us the same result above. Often, when the vehicle is used regularly as part of employment, we can use the “Tools of the Trade” exemption as well, which is currently a $2,000 exemption. So in all, you have up to $11,500 in exemptions that can potentially apply to cover the equity in your vehicle.

Can I Buy A Car Before Bankruptcy?

Yes, you can purchase a vehicle or refinance a vehicle prior to filing bankruptcy. The transaction needs to be disclosed to the court, but as long as you don’t have too much equity in the new vehicle—and most new vehicles don’t, because the purchase price is usually close to the new loan amount—then you’ll get the same result.

Jointly Owned Vehicles

Determining who is on title to the vehicle determines who has the ability to use the exemption. For vehicles jointly owned, the exemption doubles; however, each debtor can apply the exemption to one vehicle only. Proper planning with your Charlotte bankruptcy attorney will insure the best result.

If you’d like to speak with an attorney today about your options, or just have general questions, please call me. That’s part of my job and the call is free. 704.749.7747

Property taxes are treated as priority debt in a bankruptcy, but very rarely cause a problem for clients filing a Chapter 7 or Chapter 13 bankruptcy, so long as action is taken before the taxing authority takes aggressive steps to  collect on the debt.

Most clients easily grasp the concept of secured debt vs. unsecured debt. Secured debt, essentially, is debt that is secured by an interest in property. Your car would be a good example. If you stop paying, the creditor has a right to repossess the property—their loan is secured by your vehicle. Unsecured creditors have no such rights based on your contract with them, though they can use the court system to get to your property. Priority debt works a little differently.

The bankruptcy code distinguishes certain types of debt as priority debt. The theory is that this type of debt deserves a higher treatment than credit card debt or medical bills. Examples of priority debt are spousal or child support, and tax debt. In a Chapter 13 bankruptcy, all priority debt must be re-paid over the course of the plan in bankruptcy. In a Chapter 7, priority debt survives the bankruptcy; it doesn’t keep you from filing, but you will still have to answer to those creditors after your discharge.

Property taxes that come due within one year of filing are considered priority debt. Additionally, for as long as the client owns the property the debt is associated with, that debt is priority debt and secured by the property. There is good news, though. Whether in a Chapter 7 or a Chapter 13, if the client relinquishes the property, it will typically go through the foreclosure process.

As part of the foreclosure process, back taxes are typically paid by the foreclosing bank, in order to give the new buyer clear title. So, for most clients, it makes sense to delay paying the property tax, give up the property in bankruptcy, and hope the foreclosing bank or new buyer will pay them as part of delivering clear title to the new buyer. All of this can typically be accomplished before the taxing authority takes more serious steps against the client to try to collect on the debt.

I am currently assisting a client with a situation where the bank has frozen funds in his bank account. While the laws in bankruptcy can assist in helping you regain access to the frozen funds in your account, it can be a slow and painful process. There are ways to avoid having your money frozen by your bank, but you need to consider them prior to having your North Carolina bankruptcy attorney file your bankruptcy petition.

Withdraw Your Funds

You may have a longstanding relationship with your bank. They may have treated you well in the past. Unfortunately, when it comes to bankruptcy filings many banks go into self-protection mode. By removing your funds from your accounts prior to filing bankruptcy, you eliminate this risk.

Another option would be to keep the account open but lower the balance to an amount you can stand to lose if the bank freezes your funds. My preference is to cut ties and start over with a new bank.

Circumstances Where Banks Freeze Funds

If you have a loan with the bank (vehicle, line of credit, etc.), you’ve created a creditor/debtor relationship and they are entitled to use your available funds to put toward that loan you owe them. They have been known to exercise this right when they anticipate your bankruptcy filing.

While ACH debits are not technically ‘freezing funds,’ you will find it extremely difficult to get an ACH debit discontinued, resulting in funds going to creditors you no longer have to pay if you’re filing bankruptcy—if you close the account, you’ll accomplish this immediately and with much less hassle.

If a creditor obtains a judgment against you, there is a chance the court will approve a levy on your account. The bank will cooperate in this measure and your funds will be frozen. If you plan to file bankruptcy, moving the funds to another account will buy you enough time to avoid this until you get the bankruptcy petition filed in North Carolina.

Protect Yourself And Your Family

You are going through a difficult financial time. Your top priority is not your relationship with your bank. Your top priority is providing for yourself and your family. If you have noticed odd activity by your bank or you are receiving notices from the court regarding a debt, please call me. We will put a plan together to ensure you maintain access to the money you’ve earned. 704.749.7747.

Whether you are getting harassing phone calls from creditors, or you’re being sued by them, by taking the right steps now, you can maximize the property you can protect. We have all heard rumors about changing the names on the deed of the house, or transferring title to a vehicle out of your name, but what are the facts?

There Are Judgment-Proof Individuals

In North Carolina, you are judgment-proof when by virtue of the laws of the General Assembly, creditors have no legal way to collect on the amount you owe. North Carolina has a set of state exemptions which individuals can apply to their property. These are essentially dollar value thresholds for equity in homes and vehicles, the value of personal property, and balances in checking accounts. If your property falls within the threshold the creditor cannot take it.

Jointly Owned Property

In North Carolina, the tenancy by the entirety (or entireties) is a form of real property ownership. It is created when a married couple simultaneously takes title to real estate by deed conveyance. This form of property ownership protects each spouse against the actions of the other—both spouses are required to transfer title at a later date. In addition, the creditors of one spouse cannot force the sale of property held as tenancy by the entireties. Lastly, a judgment obtained by a creditor of one spouse only will not attach to the property. This means you can refinance or sell that property without being forced to pay that judgment.

If your debt is jointly ‘owned’ by you and your spouse, the creditor would have access to the property held as tenancy by the entireties. Quite often, clients believe they have jointly owned debt with a spouse when in fact one spouse owns the debt and the other spouse is simply an authorized user of the credit card or account.

Call 704.749.7747 today to speak to an attorney. Or, complete this 2 minute online evaluation and we will call you today.

BooksWhen a creditor obtains a judgment against you, there is a potential they will levy your bank account or garnish your wages. This makes an already difficult financial time exponentially more frustrating.

What Is A Bank Levy?

A bank levy is when a creditor with a judgment is given access to—and takes—your existing funds in a bank account in order to satisfy the court-ordered amount you owe them. The creditor must follow the rules surrounding Service of Process throughout all steps in the lawsuit but the end result is they reach into your bank account for the funds.

What Is Wage Garnishment?

Wage garnishment is different from a bank levy in that your wages are being directed from your employer to the creditor. While wage garnishment is less common and typically reserved to priority debt such as money owed to the IRS or the North Carolina Department of Revenue, the result is the same—you lose access to your funds.

What Are My Options?

Contest the lawsuit: If the lawsuit is in progress, you will be served with notice of a chance to appear before the court to dispute the claim of the creditor. In the alternative, you will be served with a Notice Of Right To Have Exemptions Designated. This form is your chance to exercise your right to protect certain funds and assets from creditors. The exemptions follow closely with the exemptions available in bankruptcy, so calling a Charlotte bankruptcy attorney is a great place to start if you’re under deadline to complete this form and submit it to the court.

Stop Using The Account: If your bank account is levied, you can simply switch banks or start cashing checks outside of banks. While there may be some fees and frustration associated with this, regaining access to your money is what’s most important. If you continue to deposit funds into the bank account, the creditor will continue to levy them until the debt is paid in full, per court order.

File Bankruptcy: A bankruptcy filing immediately freezes attempts by creditors to collect on a debt by way of the Automatic Stay imposed in bankruptcy. This Automatic Stay includes levied bank accounts. While there is a chance you can recover some of the previously levied funds, you can be guaranteed with the bankruptcy filing that the levy will discontinue while your bankruptcy case is active.

Won’t The Levy Or Wage Garnishment Return After Bankruptcy?

It depends upon the type of debt, but generally speaking the bankruptcy will discharge the debt associated with the bank levy or wage garnishment. Yes, even tax debt is subject to discharge if it meets the requirements in bankruptcy. You will be able to safely deposit funds into a bank account while the bankruptcy is in progress because of the Automatic Stay. After bankruptcy, the debt will no longer exist so the threat of levy or wage garnishment as to that debt is a non-issue.

Speak to an attorney now by calling 704.749.7747. Information is your most powerful weapon against the aggressive tactics of creditors and collection agencies. We are here to help.

Yes. There are exceptions, but generally speaking your retirement funds are protected from creditors in a bankruptcy. This is why it’s so important to take action and consider bankruptcy before depleting retirement accounts to manage bills. A Charlotte bankruptcy attorney can assist in determining whether your funds are protected, but here are some general rules:

The Law

The Supreme Court has found that the anti-alienation clause protects your retirement accounts from creditors. What this means is that your retirement funds are not included in your bankruptcy estate so it is outside the reach of creditors and the bankruptcy trustee.

Qualified Plans

Provided the funds are held in a qualified plan under the federal pension savings act and have not been transferred into that account for the purpose of avoiding creditors, you will be able to protect them even when filing bankruptcy.

IRAs

I represent a lot of clients who have their own businesses and do not contribute to employer 401k plans. Instead, they often have IRA contributions they need to protect.

IRAs represent a different type of retirement vehicle, owned by individuals. These are protected up to $1 million. Unfortunately, savings and checking accounts are not protected as retirement funds even if you label them as such or intend to use them for retirement purposes. There are exemptions in bankruptcy, however, which can be used to protect money in these accounts.

401k Loans

Lastly, it is not uncommon to have a 401k loan in place when filing bankruptcy. These loans are not dischargable in the bankruptcy but together with back taxes and other similar debt, they will not prevent you from a successful filing.

Call today to speak with me regarding your options—you’ll feel better knowing your rights and I’m happy to have the conversation. 704.749.7747.

After a creditor obtains a judgment against you, they will naturally try to collect on that judgment. This means there’s a chance the Sheriff is going to make an appearance at your home on behalf of the creditor. But there are ways to protect your property. Typically, the history to this point is as follows:

The Creditor Files A Lawsuit

You’ll receive a notice from the court that a lawsuit has been filed against you by a creditor. This is typically after attempts from the creditor to collect monthly fees or settle on the debt with you, unsuccessfully. This notice will set a hearing date.

The Hearing Is Held

If you have legal grounds to object—it’s not your account, you settled the debt, etc—this is the time to make your case. For most clients, there are no legal grounds to object, so they don’t attend the hearing. As a result, a default judgment is entered in favor of the creditor. This judgment gives the creditor the right to pursue the funds through the legal system.

Notice Of Right To Have Exemptions Designated

If you receive a Notice Of Right To Have Exemptions Designated, your creditor is pursuing their legal rights to collect on the judgment. You have 20 days to respond to this notice, and it’s your chance to protect property from the creditor. There are Federal and State exemptions that assist you in protecting your vehicle and other belongings. You can find a list of them HERE. By returning this completed form to the court within 20 days, your exemptions will be entered into the court record.

Writ of Execution

Next, the attorney representing the creditor will obtain a Writ of Execution from the judge, which leads to the Sheriff showing up at your door to collect on the debt.

NOW WHAT??

Communicate with the Sheriff and the Sheriff’s office. Call the number on the Writ of Execution and ask for more time. The Sheriff will typically agree to a specific amount of time before coming to your home, especially if you are going to file a bankruptcy.

Won’t I Lose The Property In Bankruptcy?

In most cases, you can file a bankruptcy and keep your property. The filing of the bankruptcy freezes all collection attempts. In the meantime, your bankruptcy attorney will strategize with you to help ensure that you keep your property through the bankruptcy. Again, the exemptions mentioned above will be applicable.

If you’re facing a judgment, calls from creditors, or the fear that the Sheriff will show up, don’t delay. Call a Charlotte bankruptcy attorney today and get advice and help. I’m happy to provide a free consultation in bankruptcy to help you determine your options. You can reach me at 704.749.7747.