As an Asheville Bankruptcy Lawyer, I speak to potential clients on a daily basis who are having difficulty paying their bills. Once behind, consumers grow concerned about the assets most precious to their family’s health and well-being: their house, their retirement accounts, and the money they had planned to leave behind for their children. At an initial bankruptcy consultation, my goal is to describe the potential client’s options so that they can make an informed decision about their best financial alternative.
Make a plan to eliminate financial stress.
Exemptions. Generally, property can be protected by using the available North Carolina bankruptcy exemptions. Creditors are prohibited from taking away exempted property, by law, in order to satisfy any debt obligations owed to them. In over 90% of Chapter 7 bankruptcy cases filed in Western North Carolina, consumers have been allowed to keep all of their property while also obtaining a Chapter 7 discharge of their debts. A Chapter 13 bankruptcy case is another tool used to protect assets which I will discuss in an upcoming blog post. The following are examples of successful strategies I’ve seen used time and time again to protect assets for consumers with Chapter 7:
Protecting Retirement Accounts From Being Spent Down. Almost nobody is going to be able to work until the day that they die. Therefore, North Carolina laws allow an individual to protect the funds they have deposited into a qualified retirement account. A very common strategy I help clients employ is to file a Chapter 7 bankruptcy case to discharge unsecured debts (credit cards, medical bills, or personal loans) or secured debts on property you no longer want (upside down cars or houses). Before taking withdrawals out of your retirement account to pay monthly bills, seek advice from a qualified professional about better alternatives.
Protecting Home Equity From Credit Card Debt. Many families have managed to purchase a home, but are still having a hard time making ends meet. North Carolina law allows spouses to protect $70,000 worth of equity in their homestead. For example, imagine a young couple with a home worth $150,000 and a mortgage worth $100,000. Further, they have a combined $40,000 in credit card, medical, and unsecured personal loans. It might make sense to file a Chapter 7 bankruptcy case sooner rather than later in this scenario because home values have been rising in and around Asheville. If the clients file their case prior to their home equity exceeding the $70,000, their Chapter 7 discharge will permanently end their unsecured debt problem via the discharge, and their home equity can then grow beyond the $70,000 threshold without interference from the discharged unsecured creditors.
Protecting Assets for Future Generations. Many retirees and workers approaching retirement had bad timing with the mortgage crisis which left them with few remaining assets to leave behind for their children. A properly designed Chapter 7 bankruptcy case can discharge debts, making the process of distributing property after death easier without the unsecured creditor claims, after the clients pass away. Instead of using those assets now to pay unsecured debts, those same debts can be discharged. Filing the proper bankruptcy paperwork can have the effect of preserving assets to be left behind for family when one passes away.
Become Informed. These are only three examples of how one can use bankruptcy laws, and bankruptcy exemptions, to protect their family’s assets. Every situation is unique, and it is smart to get options whether one files a bankruptcy case or not. For those of you in Western North Carolina, I would be pleased to offer options in a free, initial bankruptcy consultation.
Photocredit: Skippyhaha Vintage
