Bankruptcy Laws in North Carolina
Filing bankruptcy is becoming more prevalent in recent economic times. Raise freezes, unemployment, exorbitant healthcare costs and the rapidly rising cost of living are forcing Americans into bankruptcy. It has been estimated a new petition for bankruptcy is filed every ninety minutes in the United States. If you are considering bankruptcy, you certainly are not alone!
Individuals have basically two options when filing bankruptcy: Chapter 7 and Chapter 13. Chapter 7 requires the liquidation of your non-exempt assets in order to pay off debt. Chapter 13 allows you to maintain your property and possessions while making a monthly reduced payment to your creditors over a period of three to five years. We will examine the bankruptcy laws in North Carolina and how it will determine your eligibility. First, we must briefly clarify the difference between the two chapters.
Chapter 7 bankruptcy calls for liquidation of your exempt assets in order to pay off debt. This is where the specific bankruptcy laws in North Carolina come into play. Before filing bankruptcy, you will be required to take the means test. If you have low income, don’t own any property and have a high amount of debt, Chapter 7 bankruptcy may be your answer. Let’s look at what the means test entails and the exemptions allowed according to the bankruptcy laws in North Carolina.
The first step in the means test is determining your disposable income. This is calculated by your gross income less IRS approved expenses less state approved exemptions. According to the bankruptcy laws in North Carolina, what is exempt from sale are: up to $35,000.00 real or personal property for homestead; 60 days’ worth of earnings to support a family; one vehicle with a value of no more than $3,500.00; up to $5,000.00 personal property minus any claimed in real property; up to $5,000.00 for household furnishings, goods, appliances, books, clothing, animals, crops and musical instruments; maximum of $2,000.00 for tools of the trade and trade manuals.
If after calculating disposable income based on the above, you have $6,000.00 or less over a period of five years, you more than likely qualify for Chapter 7 bankruptcy. If not, look into the reorganization program offered by Chapter 13. You will keep your property under Chapter 13 and repay your debt at a reduced rate over a period of up to five years.
If you do not own property, according the bankruptcy laws of North Carolina, Chapter 7 may be your way out from under overwhelming debt. Take the means test before making a decision. And, please, do yourself a favor; hire an attorney who specializes in bankruptcy to represent you should you decide to file.