Bankruptcy can be a scary prospect for any business owner, especially for small businesses. If you are an entrepreneur considering bankruptcy, it is important to understand the different kinds of bankruptcy and how each may affect your business. Depending on what your goals are, there are various avenues you may choose to pursue at this time. To get started in pursuing bankruptcy, contact an experienced lawyer. This crucial first step will ensure you have the guidance necessary to make informed decisions.

Types of Small Business Bankruptcy

In North Carolina, small businesses pursuing bankruptcy usually file under Chapter 7 or Chapter 11 of the bankruptcy code. Chapter 7 involves liquidating the business assets to repay creditors, while Chapter 11 bankruptcy allows the business to reorganize and continue operating while repaying debts over time. Choosing the appropriate bankruptcy chapter depends on the business’s financial situation, goals, and long-term viability.

The Automatic Stay and Debt Discharge

Upon filing for bankruptcy, an automatic stay goes into effect, which halts all collection efforts by creditors. This provides temporary relief for the business and allows for the development of a repayment plan. In Chapter 7 bankruptcy, the business’s debts may be discharged, relieving the company of its obligations. In Chapter 11 bankruptcy, the business proposes a repayment plan to creditors, which, if approved, allows for the restructuring of debts and continued operations.

Medical debt is a growing concern for millions of Americans, often leading to immense financial distress and even bankruptcy. If you are looking for a way to alleviate yourself of medical debt and are considering bankruptcy as an option, it is strongly advised you contact a lawyer for assistance. Your lawyer is a legal professional who will help you pursue bankruptcy while also ensuring that your rights and interests are protected throughout the process. While pursuing bankruptcy without a lawyer is possible, it is not recommended. Bankruptcy law can be complex, which makes the assistance of a lawyer that much more important. 

Understanding Medical Debt 

Medical debt is one of the leading causes of bankruptcy in the United States. Despite having health insurance coverage, people may still face significant out-of-pocket expenses, including deductibles, co-pays, and uncovered treatments. In North Carolina, when medical bills accumulate and become unmanageable, bankruptcy can offer a fresh start by discharging or reorganizing the debt.

Chapter 7 Bankruptcy for Medical Debt

Chapter 7 bankruptcy, also known as liquidation bankruptcy, is a common choice for people seeking relief from medical debt. Filing for Chapter 7 allows for the discharge of eligible debts, including medical bills, thereby providing a clean slate and allowing people to rebuild their financial lives. However, it is important to note that certain assets may be liquidated to repay creditors, and income eligibility requirements must be met to qualify for Chapter 7 bankruptcy. 

 Chapter 7 bankruptcy is a legal option that can help people and businesses in North Carolina struggling with overwhelming debt. Knowing the pros and cons of filing for Chapter 7 bankruptcy is important for any person or business considering using it as a solution to deal with debt-related problems. If you are interested in pursuing Chapter 7 bankruptcy, contact a bankruptcy attorney to help make sure you can make an informed decision about your financial future. 

Pros of Chapter 7 Bankruptcy

1. Debt discharge – One of the primary benefits of Chapter 7 bankruptcy is that it allows eligible people in North Carolina to discharge most of their unsecured debts, such as credit card bills and medical expenses. This means you will not be legally obligated to repay those debts, giving you a fresh start. 

2. Immediate relief – Once you file for Chapter 7 bankruptcy, an automatic stay is implemented. This means all collection actions by creditors will be halted. This means no more harassing phone calls, wage garnishments, or legal actions against you. It provides immediate relief from the stress and pressure of debt. 

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Being in debt is a stressful situation, especially for those who have encountered financial difficulties that have affected their ability to pay what is owed while covering other ongoing expenses. If you are in this situation, you may be dealing with constant calls, letters, and threats from creditors and collection agencies, and you may feel helpless and overwhelmed as you attempt to deal with your financial issues and address your family's needs. Fortunately, there are legal measures you can take to stop creditor harassment, and in some cases, filing for bankruptcy may allow you to eliminate some or all of your debts.

Your Rights Under the Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act (FDCPA) is a federal law that regulates how creditors can contact and communicate with debtors. Under this law, you are protected from harassment by creditors, and you can take steps to address any harassing behavior. The FDCPA allows you to:

• Address abusive practices - Creditors are not allowed to use abusive language, call you repeatedly in an annoying manner, make threats of violence, or speak to you without identifying themselves as debt collectors. If creditors take an aggressive or abusive approach when attempting to collect debts, you can file a complaint against them with the Consumer Financial Protection Bureau (CFPB).

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If you are like many people considering bankruptcy, the idea of losing your home is a major concern. While bankruptcy will allow you to eliminate some of your debts, the discharge of your home mortgage will allow the lender to foreclose on your home. You may be able to avoid this in certain situations, but if you also have a second mortgage on your home, you may be wondering how that debt will be treated in a potential bankruptcy case. The good news is that second mortgages can sometimes be eliminated or reduced through bankruptcy, depending on your individual circumstances and the type of bankruptcy you file.

Mortgage Loans in Chapter 7 Vs. Chapter 13 Bankruptcy

In a Chapter 7 bankruptcy, your first and second mortgages may be discharged entirely along with any other debts you owe. However, as mentioned, above, the lender or lenders may then pursue a foreclosure. Because of this, Chapter 7 is usually only an option if you do not plan to stay in your home.

In a Chapter 13 bankruptcy, your debts will be restructured, and you will be required to repay a portion of what is owed over a three-to-five-year period. If you choose not to discharge your mortgage debts, you can use this repayment plan to pay back missed payments and any applicable fees over time. This will allow you to become current on your mortgage loans and avoid the loss of your home.