What Do I Need to Know About Filing Bankruptcy in North Carolina?

Struggling debtors who have lived in the state for at least six months may opt to file bankruptcy, notes both the United States Bankruptcy Court Eastern District of North Carolina and the book "How to File for Chapter 7 Bankruptcy." Bankruptcy is a federally regulated debt-relief program that offers people struggling financially options to deal with their consumer bills such as credit card and medical accounts.

Available Types of Bankruptcy

Most people who file bankruptcy in North Carolina choose Chapter 7 debt forgiveness or partial debt repayment under Chapter 13. Debtors who declare Chapter 7 may lose more of their assets, such as interests in real estate or bank accounts, notes the book "How to File for Chapter 7 Bankruptcy." Also, a Chapter 7 proceeding negatively impacts credit ratings for 10 years from the date of filing while Chapter 13 negatively affects credit scores for seven years from the date of filing.

Chapter 7 Income Qualification

Not everyone can economically qualify for Chapter 7 bankruptcy. People who live in North Carolina and earn less than the state's annual median income for their household sizes can automatically declare Chapter 7; debtors who earn more must prove through a federal means formula that they cannot pay their debts and care for their families' basic needs. As of 2010, the annual median income for a single resident was $38,794, while the figure for a household of four people was $67,296, according to the U.S. Trustee Program.

Misconceptions

You can't include every debt in bankruptcy or include future debts, warns both the Bankruptcy Court Eastern District of North Carolina and the book "How to File for Chapter 7 Bankruptcy." Back taxes must be at least three years old to be reduced or eliminated in bankruptcy; child support, almost all federally-backed student loans, alimony, court fines, and debts incurred right before bankruptcy cannot be included in your case.

Required Hearings

You must attend a 341 hearing in case your creditors object to your bankruptcy case; failure to attend will lead to the dismissal of your petition. Also, you or an attorney you hire must attend the discharge hearing; during this hearing a North Carolina bankruptcy judge can confirm, amend or deny your request.

State Asset Exemptions

You can potentially preserve some of your assets, including partial real estate equity, under North Carolina bankruptcy exemptions, notes the Bankruptcy Action website. As of 2010, each debtor filing personal bankruptcy could keep up to $35,000 in real estate equity, $3,500 of motor vehicle equity and up to $5,000 of household goods.

References

• "How to File for Chapter 7 Bankruptcy"; Stephen Elias, Albin Renauer and Robin Leonard; 2009
• U.S. Bankruptcy Court Eastern District of North Carolina: Helping You Help Yourself
• U.S. Trustee Program: Census Bureau Median Family Income by Family Size
• Bankruptcy Action: North Carolina Bankruptcy Exemptions