Information on Filing Personal Bankruptcy in North Carolina
A North Carolina debtor who may be unemployed, have large medical expenses or overextended credit card debt may be seeking a solution to these financial problems. If the debtor has sizable debt with no way of paying it off, he may consider filing for bankruptcy. In a Chapter 7 bankruptcy case, a debtor may be able to discharge many of his debts.
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Median Income
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Under the bankruptcy reform laws of 2005, a debtor must take and pass a qualifying means test before filing for Chapter 7. The debtor must compare his family income with the median family income in North Carolina. As of 2008, the North Carolina median incomes were: single earner, $38,656; two-person family, $52,008; three-person family, $56,727; and four-person family, $67,056. For each additional family member, add $7,500.
Disposable Income
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If the debtor’s family income is above the state median, he may still qualify for Chapter 7 bankruptcy based on his disposable income. To determine monthly disposable income, the debtor deducts his allowed monthly expenses from his monthly income. If his monthly disposable income is less than $100, he can file for Chapter 7 bankruptcy. If his monthly disposable income is above $100 but that amount would not pay at least 25 percent of his unsecured debt over five years, then he can still file for Chapter 7 bankruptcy.
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Filing
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The debtor’s next step is to file his bankruptcy petition and schedules and pay a filing fee of $299. Once the case has been filed, a trustee will be appointed to oversee the case. The trustee will contact the debtor’s creditors, informing them of a bankruptcy filing. Once the case has been filed, creditors must cease all efforts to collect on debts. The trustee will take possession of the debtor’s property and decide what property the debtor can keep and what property will be sold to pay the debtor’s creditors.
Exemptions
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North Carolina has a list of property that the debtor can keep, i.e., exempt property. North Carolina’s exemptions include: a homestead up to $18,500; a motor vehicle up to $3,500; health aids, clothing, household goods; animals, musical instruments and crops up to $5,000, plus $1,000 per dependent up to $4,000 total; personal injury or wrongful death recoveries; college savings accounts up to $25,000; a burial plot up to $18,500, in lieu of homestead; wages earned but unpaid 60 days prior to filing; pensions; public benefits; tools of the debtor’s trade; insurance payments; alimony and child support; and business partnership property.
Warning
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Median state incomes may change in the future as well as exemptions. Debtors should refer to their state law for a complete listing of all exempt property.
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References
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