Can I Have Too Much Debt to File Bankruptcy?

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In terms of a Chapter 7 bankruptcy you cannot have too much debt to qualify.  There is no minimum debt amount to be eligible to file for a Chapter 7.  However, since a person can only file a Chapter 7 bankruptcy once every 8 years, it is important to determine that the time that you file your bankruptcy that your debt is absolutely too much for you to pay back.

For a Chapter 13 bankruptcy there are some limits in regards to having too much debt.  A person can have no more than $360,475 of unsecured debt, which an example of unsecured debt would be credit cards and/or medical bills and no more than $1,081,400 in secured debt.  The best examples of secured debts would be a house or car.  The restrictions for a chapter 13 bankruptcy are based upon the time constraints that a person will actually be in bankruptcy.  A person is required to pay back a portion of their debts within 60 months while in a Chapter 13 bankruptcy and this time frame helps determine the amounts that you will be paying each month to the trustee.

Therefore, you cannot have too much debt to file a Chapter 7 bankruptcy but you may have too much debt to file a Chapter 13 bankruptcy. If you are unable to file a Chapter 13 bankruptcy then you could always file a Chapter 7 instead.

How Do I Pay for a Bankruptcy Lawyer if I’m Bankrupt?

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Understandably, this is one of the most common questions we get and it’s a good one! With the economy being in such a downturn, this is often one of the first questions asked, and for many, it’s the most important.  “If I can’t pay my bills, how can I afford to pay you?”  Simply put, many firms, along with ours, allow you to set up your own easy payment plan.  You choose the amount that you wish to pay and you pay at your own pace, making a difficult time less stressful and more convenient for you.  Also keep in mind, once you’ve met with an attorney and have made the decision to file bankruptcy, you may be able to stop making payments on most of your unsecured debt like credit cards, some personal loans and medical bills. By not making these payments it will free up some of your income which can then be used to help pay for your bankruptcy fees.

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Depending on where you file, the Court may require that your attorney fees be paid in full before your bankruptcy can be filed. The reasoning makes some sense. The courts look at it as your attorney is the person who is supposed to help you wipe out your debts. However, if the attorney isn’t paid up front – then you will owe them as well. Their motivation to help you wipe out your debts is probably gone when it means the attorney wouldn’t be paid. Therefore, the courts have said that the attorneys fees in Chapter 7 bankruptcies must be paid before the case is filed.

On the other hand, if you are having to file a Chapter 13 bankruptcy the courts will allow the attorneys to collect only a portion of the fees and have the remainder of the attorneys fees paid in the Chapter 13 bankruptcy plan. This will help lower the initial burden of trying paying all of the fees up front.

It is important to remember that even though a payment plan may be available to you allowing you to pay at your own pace, some individuals may be facing other deadlines. Each individual bankruptcy is different. There may be certain circumstances that prevent you from taking your time to pay (and file). If you have a foreclosure sale date, a pending repossession, or a pending judgment/writ of execution, you most likely will not have the extra time to leisurely pay.  You may have no choice but to get your bankruptcy filed before a specific deadline, and in that case, you will have to pay in full in order to enact the bankruptcy stay so it protects you and your assets.

Does Filing for Bankruptcy Lower My House or Car Payment?

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Depending on which bankruptcy you file, bankruptcy may lower your monthly payments for a car but will not lower your payments for a house.  A Chapter 7 bankruptcy will not lower your monthly payments but you will be wiping out all of your other debts and will no longer be charged interest and late fees on those payments. Therefore, you free up more money each month which helps your ability to make your car or house payments each month.  If you still feel like there is no way that you would be able to afford to make the payment each month, then you can surrender your vehicle or house and wipe out any mortgage or car loan that is left over.

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In a Chapter 7 bankruptcy, once you file, your secured creditors will want you to sign what’s known as a reaffirmation agreement.  A reaffirmation agreement tells that creditor that you will continue to make your payments as contracted.   In a Chapter 7 bankruptcy, you are not required to sign a reaffirmation agreement on your home, but you must sign one in order to retain your vehicle.  In either case, you must continue to make your monthly payments, and upon default, they have the right to foreclose or repossess the property.  Now, there are some cases in which you can redeem your car instead of reaffirming it, but you will need to discuss this with your attorney.

In a Chapter 13 bankruptcy, the trustee will be making your house and vehicle payment through the bankruptcy plan.  As with a Chapter 7 bankruptcy, your mortgage payment will be the same as it was before you filed the bankruptcy.  There is no way to “get around” this unless you refinance your home, in which you will need to obtain permission from the court to do so once you have filed the bankruptcy.  If your vehicle is over 910 days (2 ½ years) before the date that you filed the bankruptcy, you may be able to do what’s known as a “cramdown”.  If your loan balance is higher than what your vehicle is worth (the court will usually determine the value based upon NADA), then you can pay back the vehicle based upon what it is worth rather than the contracted loan balance.  This option is only available in a Chapter 13 bankruptcy though.  If it was purchased within the 2 ½ years before you filed, you will pay back the amount that is contracted in your Chapter 13 plan.

Therefore, bankruptcy may lower your car payment through a “cramdown”. However, it you will not be able to lower your monthly house payment through a bankruptcy. If you are behind on your house payment you could potentially file a Chapter 13 bankruptcy which will help you pay back the arrearages, or amount owed, but it will not actually lower your mortgage payment.

What Types of Debts Cannot Be Wiped Out in Bankruptcy?

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Whether filing for a Chapter 7 bankruptcy or Chapter 13 bankruptcy, there are certain debts that you may not discharge when filing your petition.  These debts include the following:

Federal taxes and state taxes are typically not wiped out in bankruptcy. Any type of lien issued by the government is not eligible to be discharged through the bankruptcy.  We will include your debt in the bankruptcy petition so that the State of Federal authority will be notified of your filing.  It is your responsibility to contact the IRS or State to make payment arrangement.  If you fail to pay your current tax bill or repay your back taxes, the State or IRS would likely put a lien on your home or another asset that you own.  However, there are certain times where taxes may be wiped out. However, it is very rare that you will be able to have taxes wiped out.

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Government loans such as federal student loans cannot be discharged through bankruptcy and must be paid back, in full, to the agency that issued the loan.

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Court ordered domestic support obligations may supersede the Bankruptcy filing.  For instance, if you have a court ordered child support or alimony payment already in place with the Court, this payment is not a viable debt to be discharged in bankruptcy.  If you fail to make these payments, the Court may garnish your wages in order to collect the debt.

Any debts incurred AFTER you have filed your bankruptcy petition may not be wiped out. You may not incur additional debt and then contact your attorney requesting that the debt be added to your bankruptcy filing.  This is fraud and could result in further legal action.

Debts incurred within ninety (90) days of filing your petition are closely scrutinized by the Bankruptcy court and may not be eligible for discharge with your Bankruptcy filing if they are deemed to be fraudulent. If you go out and purchase items on a credit card, knowing that you were then going to file bankruptcy, the debts will not be wiped out.

Can My Employer Fire Me If I Can't Work After Being Injured?

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Your employer must attempt to find alternate work for you if you are injured on the job.  In the event your injury is to an extent you cannot perform a job position offered by your employer, you are usually sent home with restrictions and you will receive a weekly workers’ compensation benefit check from your employer’s insurance company until your employer can find a job in which you can perform within the restrictions set by your doctor.

StethoscopeYour employer cannot terminate or fire you from the job due to your inability to perform the job due to your injury.  However, be aware that some employers will try to force you to resign from a job.  For example, your doctor may have ordered that you cannot stand on your feet for over ten minutes at any given time.  Your employer, in an attempt to get you to quit, may place you sitting on a stool all day long and have you count the number of people that walk through the office door.  Eventually you will become so bored with sitting on the stool every day for many days you will get up and walk out the door and quit the job.  Don’t do this because it could affect your benefits. Many employers may try to play these psychological “games” with you.

Despite that, an employer can terminate your job position.  For example, business is bad and the employer cannot support your job position – they may eliminate that position if done so for the benefit of the business. However, they would likely need to get rid of all similar positions as well. In other words, if you are an assistant manager, they would likely need to dissolve all assistant manager positions – not just yours.

Again, your employer cannot fire you simply because they do not have a job for you to perform due to your injury. Instead, they would need to find suitable job tasks that fall within the medical recommendations of your doctor.

Do Workers' Comp Laws Protect Independent Contractors in North Carolina?

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The short answer is no, an independent contractor is not covered by Workers’ Compensation laws in North Carolina.  However, the answer really depends on the situation.  If the independent contractor is:

performing the functions of an employee,

taking guidance and direction from the employer,

has his or her hours set by the employer,

working for no other employer, and

basically acting as an employee

then the North Carolina Industrial Commission may view this person as an employee rather than an independent contractor.  As a result, this person may be covered by the Workers’ Compensation Act in North Carolina.

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An independent contractor who has multiple “employers” or clients, sets his/her own hours for work, and performs the job independent of the client employer will most likely not be covered by the Workers’ Compensation Act in North Carolina.

Examples are often the most helpful.

Probably “employee” – A person is hired as an independent contractor to enter data.  This person is given specific hours to work, takes direction from a supervisor within the company, and attends training classes for the company.  This person will most likely be considered an employee by the North Carolina Industrial Commission.

Independent Contractor – A person is hired to enter data.  The person decides the hours of the day they work.  The person provides the services from their home and/or the employer’s office.   The person takes limited or no direction from the employer as long as the job gets completed.  This person will most likely be considered an independent contractor by the North Carolina Industrial Commission.

Independent contractors are not specifically defined by the North Carolina Industrial Commission, however, employees are defined by North Carolina General Statute, Section 97-2 of the Workers’ Compensation Act.   The term “employee” means every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, including aliens, and also minors, whether lawfully or unlawfully employed, but excluding persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of his employer.”

Obviously each case must be reviewed carefully to determine if the employer-employee relationship exists for purposes of determining whether there is a Workers’ Compensation claim.

Can My Chapter 13 Bankruptcy Payment Change?

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The bankruptcy law allows Chapter 13 bankruptcies to last anywhere from three to five years. If you are required to file a Chapter 13 bankruptcy because you do not pass the Means Test, then your Chapter 13 repayment plan is required to be for 60 months, unless you can afford to repay 100% of your unsecured debt in less than 60 months.

Often, Chapter 13 bankruptcy debtors are apprehensive of their Chapter 13 payment for fear that over the course of three to five years, their job situation may change. It is common for people to ask, “Will my Chapter 13 payment change during my bankruptcy?”

There are two ways to answer this question:

1) Whether your Chapter 13 payment will increase during your bankruptcy, and

2) Whether your Chapter 13 payment will decrease during your bankruptcy.

Bankruptcy Questions

First, let’s discuss whether your Chapter 13 payment will increase during your bankruptcy. The bankruptcy Trustee has the ability to examine your pay stubs, bank statements, and tax returns at any time during your bankruptcy. Usually, the Trustee will do a review of your case annually. If, for example, you receive a major pay increase during your bankruptcy, the Trustee may increase your plan payments to reflect your new income. Sometimes, your Chapter 13 payment is arbitrarily increased by the Trustee to ensure that enough money is being paid for the Trustee to pay all of your secured debts (house, car, furniture, etc).
Now let’s discuss whether your Chapter 13 payment will decrease during your bankruptcy. If your pay decreases significantly, it is sometimes possible to file a motion with the court to modify your plan payments. Your attorney will be able to discuss your options with you if you suffer a job loss or a major pay decrease. Whether a plan payment can be decreased depends on the specific facts of the case – for example, how much debt is owed, how much is owed to secured creditors, how much is owed in taxes, etc.

The bottom line is that you are usually not locked into your Chapter 13 payment – if your income significantly increases or decreases, there is a chance that your Chapter 13 payment can or will be modified to reflect the change in income. However, you will need to speak with your bankruptcy attorney about the specifics of your case.

Do All Employers Need to Provide Workers' Compensation Insurance?

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In short, it depends. According to North Carolina General Statute §§ 97-2(1), 97-2(3), 97-93 an employer must carry workers’ compensation insurance if:

Three or more employees regularly employed in the same business or establishment, or

One or more employees employed in activities which involve the use or presence of radiation, or

If providing agriculture or domestic services, 10 or more full?time nonseasonal agricultural workers regularly employed by the employer

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This is to ensure that if an employee were to be injured on the job then the insurance company could handle the cost, therefore limiting the risk of the employer being insolvent and not being able to pay for treatment.  This also ensures that the employee will receive compensation for their treatment sooner.

However, there are some exceptions to this rule.  One of these exceptions is when there is an independent contractor working for an employer.

Since an independent contractor is not an employee, the employer does not have to provide workers’ compensation insurance for them.  Since, technically, they are not an employee, the North Carolina Industrial Commission does not have jurisdiction over this relationship.  The definition for employee is defined by North Carolina statute §97-2, but there are some easy ways to determine if you are an employee or an independent contractor.  The first of these would be to look at the kind of tax form you receive.  If you are receiving a W2 then you are most likely an employee, if you are receiving a 1099 then you are probably an independent contractor.  Also do you get paid overtime or certain hourly wages? Do you wear a uniform that the owner of the business has required you to wear? These are all helpful ways to determine if your “employer” must have workers’ compensation insurance  in case you are injured on the job.

How Are Workers' Compensation Benefits Determined?

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Workers’s compensation benefits are determined by a variety of factors.  One of the first questions is whether the injured worker is able to return to their job?  When a worker is injured on the job they are sent to a physician to determine the extent of their injury.  The physician may allow the worker to return to work and they will receive their regular salary as they perform their regular work duties.

On the other hand, the physician may determine the employee cannot work their regular job and may allow the worker to work, for example, only 20 hours per week.  If they are seriously injured, the physician may not allow them to return to the job until they reach what is known as “maximum medical improvement” or “M.M.I.”.  If the worker is unable to work their full schedule or a partial schedule, the employer’s workers’ compensation insurance company must compensate the injured worker’s benefits, such as salary, the worker would had received if they had not been injured.

Normally, the injured worker receives two-thirds of their average weekly wages lost due to the injury. The worker usually receives a weekly paycheck from their employer’s workers’ compensation insurance company to compensate the worker due to the lost time because of the injury.

Doctor Examining an X-Ray | Workers' Compensation

You may ask why only two thirds of the average weekly wages?  The general consensus is if the worker is receiving “full” benefits or 100% of their usual income, the worker would have no “incentive” to return to work.  Also the worker does not have to pay transportation cost or wear and tear on a vehicle if they are at home injured. Therefore, the North Carolina Industrial Commission has ruled that two-thirds of the worker’s salary is fair compensation.

The worker should receive these benefits until they are allowed, by the physician, to return to work or until a settlement is reached with the insurance company of the employer.

If you have been injured while at work it is important to contact a North Carolina workers’ compensation lawyer immediately.