What Do You Lose When You File Chapter 7 Business Bankruptcy?
Posted on Saturday, October 14th, 2023 at 8:04 pm
If your business is struggling with overwhelming debt, you might be considering filing for bankruptcy. Chapter 7 bankruptcy is an attractive option for many businesses because it is the simplest form to file. However, filing for Chapter 7 can require you to give up much of what you have worked hard to acquire. As such, it is vital to thoroughly understand the consequences of filing for Chapter 7 before making the final decision to do so. Consulting with an experienced North Carolina business bankruptcy attorney can help you understand
How Does Chapter 7 Bankruptcy Work?
Chapter 7 is a form of bankruptcy that allows individuals and businesses to get a fresh start by eliminating most of their unsecured debts. When you file for Chapter 7 bankruptcy, the court appoints a trustee to your case. The trustee’s job is to sell off your non-exempt assets and use the funds from the sales to pay off your creditors. Once you file, an automatic stay goes into effect, meaning creditors are prohibited from continuing collection efforts against you.
After you file, you’ll attend a meeting of creditors. In this meeting, your creditors and the trustee will question you about your finances. If there are no objections to your case, the court will grant you a discharge, which means that most of your unsecured debts will be eliminated. However, some debts, such as alimony, child support, and most student loans, are non-dischargeable. Additionally, if you have any secured debts, such as a mortgage or car loan, you’ll need to continue making payments on those debts if you want to keep the property.
What Do You Lose When You File Chapter 7?
When you file for Chapter 7 bankruptcy, you will likely lose most of your business assets. This includes any property, equipment, inventory, or cash your business owns. The court will appoint a trustee to oversee the liquidation of these assets, and the proceeds will be used to pay off your creditors.
In addition to losing your business assets, you may also lose any personal property you have pledged as collateral for business loans. This could include your home, car, or other valuable possessions.
It is worth noting that filing for Chapter 7 bankruptcy will also significantly impact your credit score. The bankruptcy will be visible on your credit report for up to 10 years, making it challenging to obtain credit in the future.
If You File Bankruptcy, What Can You Keep?
Many people do not realize that each state has exemptions to what must be liquidated when a party files for Chapter 7 bankruptcy. North Carolina law stipulates that those who file Chapter 7 may claim the following as exemptions:
- Up to $35,000 in home equity
- $3,500 of equity in a single vehicle
- Unpaid, earned wages for 60 days of work
- $5,000 for personal property of your choice, in addition to $1,000 for each of up to four dependents
- $2,000 for work-related equipment (tools of the trade)
- Doctor-prescribed medical equipment
- Social Security, unemployment insurance, and other public benefits
- Workers’ compensation and disability benefits
- Awards from personal injury settlements or verdicts
- 401(k)s, IRAs, and public pensions, and other retirement accounts
- Life insurance policies
- Up to $35,000 in 529 college savings plans
- Money from alimony, separate maintenance, and child support
North Carolina’s “wildcard” rule also allows you to exempt another $5,000 worth of assets if you do not have a homestead or if you limit your home equity exemption to $30,000.
In some cases, a skilled North Carolina bankruptcy lawyer can help you structure your exemptions to allow you to continue operating your business. However, you should speak to an attorney as soon as possible to maximize your chances of success.
Contact an Experienced North Carolina Business Bankruptcy Attorney
If you are considering filing for business bankruptcy, the prospect of losing so much of what you have worked hard for can feel overwhelming. However, it is important to remember that you have options. Working with an experienced business bankruptcy attorney can help you see your situation clearly and move forward with purpose.
The seasoned legal team at Bradford Law Offices has been fighting to restore the financial health of businesses in North Carolina for nearly 30 years. Our lawyers have a thorough knowledge of federal and state bankruptcy laws, and we are ready to put our skills to work for you. Call us today at (919) 758-8879 or contact us online for a confidential consultation to learn more about how we can assist you.