For many people in North Carolina, Chapter 7 bankruptcy can offer a route out of a difficult financial situation. People have the opportunity for debt relief through the liquidation of their assets, and their creditors can claim proceeds from the bankruptcy estate in order to settle outstanding debts. In many cases, people file for Chapter 7 bankruptcy because they do not have the funds to pay off their debts, so some creditors may receive only a small portion of the original debt or nothing at all.
The sale of assets and the distribution of payments to creditors is not handled by the person filing for bankruptcy. Instead, a trustee appointed by the court manages this process and determines how much to pay creditors. Before any creditor can receive payment, however, they must file an official Proof of Claim with the bankruptcy court. This form must include the name of the person filing for bankruptcy, the case number of the claim, the creditor’s name and address and the amount owed. It must also specify whether the debt is secured by collateral or not.
Some claims are considered to deserve priority treatment, handled before other debts are settled. Priority debts include child support, spousal support, wages and benefits for employees and tax debts. The trustee will announce whether the bankruptcy case is an “asset” or “no-asset” case; creditors may expect no payment at all from bankruptcy cases where a person simply does not have the assets to pay off claims. In order to receive any funds, creditors must file their claims before the deadline.
People may find themselves facing collector calls, lawsuit threats and a declining credit score when they are unable to pay their bills. A bankruptcy law attorney may provide advice on filing for Chapter 7 for debt relief.