If you're having difficulty repaying your debts, filing bankruptcy can be a last-resort option for getting out of your financial mess. If you owe credit card debts, medical bills or unsecured loans and have little or few assets, a Chapter 7 bankruptcy may be right for you.
In a Chapter 7 bankruptcy, your liability for certain debts is eliminated and you agree to give up some of your assets to repay your creditors. In North Carolina, Chapter 7 bankruptcy petitions must be filed with the Eastern or Western district bankruptcy courts.
Determining Eligibility
Before you can file a Chapter 7 petition in North Carolina, you must first determine whether you're eligible to do so. Eligibility is determined using the means test. The means test is based on your income for the previous six months and your family size.
Your income is measured against median income levels to determine whether you have sufficient income to repay your debts. In North Carolina, the median income level for a single debtor $38,656 in 2010. For a family of four, the median income limit increased to $67,056. The U.S. Department of Justice Trustee Program maintains an updated list of median income limits by state.
Before You File
In addition to the means test, you're also required to attend credit counseling in the six months before you file. This credit counseling must be completed with an agency or organization that is approved by one of the district bankruptcy courts in North Carolina. You must provide proof of credit counseling to the court at the time you file, unless your filing qualifies as an emergency situation that would not permit you to do so.
How to File
Your Chapter 7 petition should be filed with either the Eastern or Western district bankruptcy court, depending on where you live. You're responsible for paying all filing fees at the time you file. As of 2010, the filing fee for Chapter 7 was $299. You can ask the court to waive these fees or let you pay them in installments.
You aren't required to have legal counsel to file, although it is generally recommended that you consult a bankruptcy attorney before doing so. In addition to your petition, you must give the court a list of all your creditors and their contact information, a list of all debts you wish to claim in your bankruptcy, a list of your assets, proof of income and your exemptions.
State vs. Federal Exemptions
A requirement of Chapter 7 bankruptcy is that you forfeit some of your assets in exchange for wiping the debt slate clean. Under federal law, you are allowed to exempt some of your property from seizure. Both the federal government and state governments offer exemption guidelines and it's up to you to choose which ones you'll use.
As of 2010, the state of North Carolina allows debtors to exempt up to $18,500 worth of equity in their home. You can also exempt any motor vehicle up to $3,500, household goods up to $5,000 and up to $4,000 in personal property if you have dependents.
Discharging Your Case
Before your Chapter 7 case can be discharged, you must complete a second course in financial management within 45 days of filing. You also have to attend the meeting of creditors. The meeting of creditors is an opportunity for your creditors and the bankruptcy court to ask you questions about your financial situation.
This meeting is usually very brief, typically lasting five to fifteen minutes. If there are no disputes about the information you've provided, your case will be discharged within three to six months. After you receive your discharge, you are no longer liable for those debts that were included in the bankruptcy.
Bankruptcy can sometimes by the only way out of a financial nightmare but it is not without its consequence. A Chapter 7 bankruptcy can stay on your credit for up to ten years, making it more difficult to obtain new loans or lines of credit. In some cases, Chapter 7 does not actually solve the financial issues that caused you to fall into debt in the first place. You should carefully consider the short and long-term consequences of bankruptcy before filing your Chapter 7 petition.
Rebecca Lake - R.L. Lake is a freelance writer and virtual assistant living in the southeast. In addition to writing for Suite101, she writes content for ...
