Chapter 7 bankruptcy operates to discharge debts by liquidation. This allows the bankruptcy trustee to take and sell any non-exempt property, that is property not specifically protected by law. In North Carolina what property is or is not exempt is set forth in N.C. General Statute § 1C-1601. It is important to note that while you may file in North Carolina, if you have lived in another state for the two years prior to filing your petition, then that state’s exemption laws apply to your case. If you don’t qualify for any state exemption, then the federal bankruptcy exemption laws will apply.
11 U.S.C. §109 sets forth the basic requirements for a person to be a “debtor” under Chapter 7. Generally, Chapter 7 is limited to individuals who do not have disposable income to repay their debts. The means test is used to determine whether and how much disposable income an individual has repay their debts. The means test is a product of the 2005 amendments to the Bankruptcy Code. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) enacted the means test in order to protect against perceived abuses by higher income households filing Chapter 7. The means test goes as follows:
- Compare the filer’s current monthly income based on a 6-month average against the median household income for North Carolina. If the filer’s income is less than the median then the filer may file a Chapter 7, if filer’s income is greater than the median then the filer must continue to the next step.
- Determine the filer’s disposable monthly income by subtracting allowable expenses from the current monthly income. The filer’s disposable monthly income amount will allow them to either: (1) file under chapter 7, (2) file under Chapter 13. In certain cases, the amount of disposable monthly income will allow you to file a Chapter 7 only if you also cannot pay back 25% of your non-priority unsecured debt over a 5-year period.
A chapter 7 bankruptcy cannot discharge student loans (except under very specific circumstances), domestic support orders like alimony and child support, damages for personal injury to someone else resulting from DUI, criminal fines and restitution, court fees, or certain taxes.
A chapter 7 bankruptcy starts with the filing of a petition at which time the filing fee must be paid. The petition must be accompanied by a certificate of credit counseling. Within 15-30 days of filing the petition, the filing party must file several additional documents that detail the income, expenses, assets, debts and property of the filing party as well as what the debtor intends to do with any property that is secured by a debt.
The court will then set a 341 meeting. The 341 meeting includes all creditors, the bankruptcy trustee and the debtor. The debtor must attend or risk the bankruptcy case being dismissed. This meeting requires that the debtor give testimony under oath regarding his petition for bankruptcy.
Generally, a discharge will be entered approximately 60 days after the 341 hearing.
Attorney Jaime Williams‘s bankruptcy practice includes all manners of bankruptcy issues that can affect most people. Jaime can tell you whether you qualify to file for bankruptcy and what chapter is the best fit for your needs. Jaime handles bankruptcy cases that fall under Chapter 7 (liquidation), Chapter 11 (business reorganization), and Chapter 13 (individual reorganization). Jaime’s bankruptcy practice also includes Adversary Proceedings (separating filings related to a bankruptcy case, usually filed by a creditor).
Bankruptcy falls under the jurisdiction of federal courts. Individuals residing in Franklin, Granville, Harnett, Johnston, Nash, Wake, Warren and Vance county will have their cases heard in the Raleigh office of the United States Bankruptcy Court of the Eastern District of North Carolina.
Contact Attorney Jaime Williams
To schedule a consultation, please telephone us at (919) 789-4677 or complete the either the bankruptcy form below.