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Types Of Bankruptcy

Types Of Bankruptcy | Eastern North Carolina Bankruptcy Attorneys

Chapter 7 bankruptcy.  This type of bankruptcy allows a person to cancel many, or all, of their debts; such as credit card debts and medical bills.  You may keep all exempt property.  You can choose to keep your house and your vehicles if your payments are current, or you may choose to surrender your house or your vehicle.  You must give up any property that is NOT exempt or that you cannot afford to pay for under your current payment schedule.  In most cases all of your property is exempt unless you have a lot of valuable property that is paid for.  Non-exempt property may be sold by the bankruptcy trustee who may then distribute the proceeds to your creditor.

In addition an individual must “pass the means test” to file a chapter 7.  This is a constantly changing federal formula that includes your income level, household size, taxes, secured debt, certain living expenses, etc…. Each person is individually evaluated.  Allowable expenses are constantly changing.  DO NOT try to compute this on your own!  If you have non-exempt property that you want to keep, if you are behind on your car or house payments and want to keep them, or if you have high income then chapter 7 is probably not right for you.

Chapter 11 bankruptcy.  This is a reorganization bankruptcy for businesses and individuals with very large debts.  Typically the individuals who file chapter 11 are developers with lots of mortgage debt or professionals with very high student loan debts.  There are simplified provisions for qualifying small businesses.  Businesses that file Chapter 11 can continue to operate or control their own liquidation. In NC, the bankruptcy administrator supervises the case.  A chapter 11 plan is submitted to the court detailing the proposed treatment of secured and unsecured claims.  The judge then approves or confirms the plan.   The plan is then implemented.  The plan details which creditors are paid, how much they are paid and how long the plan lasts.  Usually plans for small businesses last 3 to 5 years.  If the plan cannot be completed, the case is dismissed or converted to a Chapter 7.

Chapter 12 bankruptcy.  This is a special type of reorganization reserved for family farmers and family fisherman.  There are strict guidelines for this type of bankruptcy.  There is a plan similar to a Chapter 13 and it is supervised by a trustee.

Chapter 13 bankruptcy.  This is a “reorganization” bankruptcy that allows a person to repay some or all of their debts.  The amount that you pay to your creditors is based on what you want to keep, what you earn and how much non-exempt property you have.  Usually people who choose this chapter are behind on their house and car payments and wish to keep them and catch them up.  This chapter does not necessarily mean that all of your creditors will be paid back in full.  This chapter is a way to repay taxes to the IRS or NC Dept of Revenue since there are no penalties or interest when you pay through a Chapter 13 plan.  In order to file a Chapter 13, you need some source of regular income or cash flow so that you can make your plan payment and pay your necessary living expenses.

Types of Bankruptcy Debts

All debts must be listed on your petition. It is possible to elect how you treat debts. Try to think of everything that you owe to every entity.

  1. Real estate debts – mortgages, equity lines
  2. Car loans
  3. Credit cards, gas cards, store credit cards
  4. Personal loans
  5. Furniture loans, rent to own
  6. Cash advances
  7. Pay day loans
  8. Medical debts
  9. Taxes – IRS, NC Department of Revenue, county taxes, withholding taxes
  10. Student loans
  11. Unpaid rent
  12. Unpaid alimony or child support
  13. Loans from family members