You’ve fallen into debt, done your research online, and found Chapter 7 bankruptcy. It seems like it might be the right solution for you to overhaul your debt and start out with a clean slate, but now you are asking - “how do I qualify for bankruptcy Chapter 7?”
As a liquidation debt, you need to meet a strict set of NC bankruptcy laws and rules to qualify. But once you do, most of your unsecured debt, like credit card bills, medical bills, and personal loans, will be discharged.
In 2016, more than half of the total bankruptcy cases filed were Chapter 7, and from that over 95% of filers had their debt discharged, making it the quickest, simplest and most common bankruptcy type. But, that doesn’t mean that everyone can qualify. To see if you are able to qualify for bankruptcy Chapter 7 in accordance with NC bankruptcy laws, contact an experienced bankruptcy attorney.
Qualifying for Chapter 7 Bankruptcy in North Carolina
Deciding to file for Chapter 7 bankruptcy should not be taken lightly. It is a large undertaking, and you should first discuss your options with a licensed bankruptcy attorney. Here are some strong indicators to see if you might qualify for bankruptcy.
- Your debts total more than half your annual income.
- Your monthly income is below the median level in your state.
- It would take five years or more to pay off your debt.
- Your debt interferes with other essential aspects of your life.
- You have little to no disposable income.
If you align with one or more of these indicators, you may be a strong candidate for Chapter 7 bankruptcy in accordance to NC bankruptcy laws. Here are some of the qualifiers for achieving discharged debt through this type of filing:
Your income is below or meets the threshold
In North Carolina, you must earn less than the median income for the state in order to qualify. For a household of two, that means not exceeding $50,700. For a household of three, it is $55,000, and for a household of four, it is $63,700. If you exceed these income requirements, you are not automatically disqualified. You may then take the means test.
Passing the Means Test
The Means Test in North Carolina is a calculation of eligibility to see if you qualify for relief under a Chapter 7 bankruptcy filing. What this generally seeks to absolve is that if you can at least pay off some of your debts, you should, and may be a better fit for a Chapter 13 bankruptcy type. It works by comparing your income to how much other people in your state earn, and then calculating in your expenses. In total, the Means Test evaluates your secured and unsecured debt, expenses, income and other costs of living to see if you can afford to pay off some of your own debts through Chapter 13, or if you are in need of the liquidation that Chapter 7 offers.
Not Exceeding the Limits on Prior Bankruptcies
You can only file Chapter 7 bankruptcy once every 8 years if it went all the way through to discharge. You also cannot file a Chapter 7 if within the last 6 years you have filed a Chapter 13 bankruptcy that went all the way through to discharge. If you filed a Chapter 7 or Chapter 13 bankruptcy that did not go all the way to discharge, you may still be eligible, though you may have to wait an extended period, longer than 180 days. Also, if any abuse or fraud allegations were filed towards you in a prior bankruptcy case, you may be ineligible to file again. These may include violating a court order, failing to complete your required credit counseling, or if the case was found to be fraudulent. We recommend you discuss past filings with your bankruptcy attorney to ensure you qualify for a new case.
Filing A Petition
If you fulfill the above regulations in accordance to NC bankruptcy laws, the debtor must file a petition with a local bankruptcy court. You must submit financial statement including records of assets, liabilities, income, expenses and overall financial standing, plus any existing contracts or leases in the debtor’s name. A bankruptcy attorney can help you navigate the paperwork, ensuring you are completing each step as required by the state.
Required Credit Counseling
Pre-bankruptcy credit counseling is required for all debtors. This involves a fee, and can often be completed online or over the phone. Credit counseling must be taken and passed from an accredited provider approved by the bankruptcy administration in your district. In North Carolina, your bankruptcy cannot be filed until after this step is completed successfully.
Preparing for Bankruptcy
Now that you have fully qualified for bankruptcy in the state of North Carolina, it is time to file your petition and wait for your court date. In the meantime, there are some rules you should still abide by:
- Continue to make routine payments to your creditors, but avoid any large or unusual payments.
- Do not accrue any new debt in the months leading up to your filing. A new house or car payment will be viewed as fraud and is not to be forgiven or discharged.
- Be truthful and provide complete information regarding all of your debts, assets or accounts.
- Don’t dig into your retirement accounts. Keep these accounts safe and do not use them to pay down your debts.
- Use common sense. Do not file for bankruptcy if you are about to receive an inheritance or large sum of money. This money could be seized by the court in order to pay back your debt.
If you abide by all of these rules, it is very likely that you will not lose your house, car or other assets to the repayment of your debt. Occasionally luxury assets like a second home or a boat may be sold to pay off the creditors.
Finding an Experienced and Reputable Bankruptcy Attorney
If you are struggling under unsecured debts, the first step in your bankruptcy filing journey should be to consult with an experienced and reputable bankruptcy attorney. At Iver McClellan, our attorneys are well accustomed to the ins and outs of NC bankruptcy law and can help you get the results you are looking for with the least amount of damage.
Qualifying for Chapter 7 bankruptcy involves a lot of paperwork and is a lengthy and complicated proceeding. Let our experienced lawyers help you navigate the process. Call us, or set up an appointment to discuss your case.