Bankruptcy in New Bern, North Carolina is a court proceeding through which a person or business who is unable to pay their debt is able to have some of their debt legally eliminated, or "discharged." This theoretically allows the debtor to move on with a clean slate. Of course, one should never view bankruptcy as a "get out of debt free" card, allowing someone to be relieved of their obligation to pay their debts just because they don't want to. It is meant to serve as a lifeline, preventing unmanageable debt from resulting in complete financial ruin. Accordingly, it is best treated as an option of last resort, because it can carry with it significant negative consequences, which must be weighed against the possible benefits. For example, filing for bankruptcy can severely damage a person's credit rating.
Therefore, it is prudent to consult with an experienced New Bern, North Carolina bankruptcy attorney, who can advise you of the costs and benefits of bankruptcy. Because the decision to file for bankruptcy depends very heavily on the facts of each individual case, the advice of a New Bern bankruptcy attorney cannot be substituted.
Types of Bankruptcy in New Bern, North Carolina
In New Bern, North Carolina, there are 3 types of bankruptcy in common use: Chapter 7, Chapter 13, and Chapter 11. Because bankruptcy is a creation of federal law, the procedures governing bankruptcy in New Bern, North Carolina will be similar anywhere else in the U.S. Chapter 7 bankruptcy requires the debtor to liquidate some of his or her assets in order to pay off as much debt as possible. Once the sale of the assets is complete, and the proceeds handed over to the creditors, the debt is viewed as discharged. Liquidation is basically selling assets to the highest bidder. Not all of the debtor's assets will need to be sold, and many types of property are totally or partially exempt, including homes, cars, retirement accounts, and insurance policies. This means that the debtor can keep them. It should be noted that some types of debts are not dischargeable in Chapter 7 bankruptcy, including student loans, criminal fines, taxes, and child support payments. Even when the bankruptcy process is complete, these debts will have to be paid in full.
The other popular bankruptcy system in New Bern is Chapter 13 bankruptcy. Under this system, the debtor's debts are restructured, instead of discharged. This involves creating a new repayment plan that the debtor will find manageable, given his or her income, and that will result in the creditors being paid in a reasonable amount of time. When a repayment plan is approved by a court, creditors are legally barred from attempting to collect under the original terms of their agreement with the debtor. Though Chapter 11 bankruptcy can be used by individuals, it is almost exclusively used by businesses. Similar to Chapter 13, Chapter 11 involves restructuring of debts, rather than complete discharge. The debtor is required to come up with a restructuring plan that lays out how it plans to cut costs, streamline operations, and pay its debts. The plan must then be approved by a vote of participating creditors.
One advantage of Chapter 11 bankruptcy is that it allows a business going through it to continue operations, and to trade its stock.
How Can a New Bern Bankruptcy Lawyer Help?
The decision to file for bankruptcy in New Bern is not one to be made lightly, and it certainly should not be made without first obtaining the advice of an experienced New Bern bankruptcy attorney.