North Carolina Bankruptcy Process
2005 Bankruptcy Act Credit Counseling
The 2005 Bankruptcy Act requires all individual debtors who file bankruptcy on or after October 17, 2005, to undergo credit counseling within six months before filing for bankruptcy relief and to complete a financial management instructional course after filing bankruptcy.
2005 Bankruptcy Act Means Test
Under the 2005 Bankruptcy Act you income and expenses will be analyzed to determine if you qualify to file a Chapter 7 or if you must file Chapter 13. To apply the means test, the courts will look at the your average income for the 6 months prior to filing and compare it to the median income for that state. If the income is below the median, then you may choose Chapter 7. If your income exceeds the median, the remaining parts of the means test will be applied to determine if you can file Chapter 7 or if you must file Chapter 13.
Your will likely still be able to file a Chapter 7 bankruptcy if you are unable to pay at least $6,000 over the next five years ($100 per month) to your unsecured creditors after your expenses. However, if you can pay at least $10,000 over five years ($166.67 per month or more) your Chapter 7 will likely be denied.
If you could afford more than $6,000 but less than $10,000 over five years, then a mathematical calculation determines whether your Chapter 7 will likely be successful or not. If you could afford to pay 25% or more of your unsecured debt, then a Chapter 7 will likely be denied. If you can't afford to pay 25% of your unsecured debt, your Chapter 7 filing will likely be successful. Examples of unsecured debts would include medical and credit card bills. Note that you can still opt for Chapter 13 even if you qualify to file under Chapter 7.
Gathering Paperwork
To begin the bankruptcy process you must itemize your current income
sources; major financial transactions for the last two years; monthly
living expenses; debts (secured and unsecured); and property (all assets
and possessions, not just real estate). You should also collect your tax
returns for the last two years, deeds to any real estate you own, your
car(s) titles, and the documents for any loans you may have.
Filing Bankruptcy
Once you have gathered this information, either on your own or with
the help of an attorney, you should then determine which property you
believe is exempt from seizure based on the North Carolina exemptions. To actually file, either you or your attorney,
will need to file a two-page petition and several other forms at your
North Carolina district bankruptcy court. These forms, collectively
are referred to as the schedules and ask you to describe your current
financial status and recent financial transactions (typically within the
last two years). If your creditors or the judge feel or find out that
you have not been entirely forthcoming in your bankruptcy filing, it could
jeopardize the outcome of your petition.
The cost for filing a Chapter 7 bankruptcy is $274. This fee may not
be waived but you may be able to pay it in installments. The fee of $189
for a Chapter 13 bankruptcy can not be waived.
Chapter 13 Requirements
If you are filing a Chapter 13 bankruptcy, a proposed repayment plan must
also be submitted. After reasonable monthly expenses have been paid, how
much money will you have left over to put toward your outstanding bills?
And how will this money be divvied up among those you owe? Priority claims
(such as taxes and back child support) must be paid in full; unsecured
debts (like credit card debt and medical bills) are usually paid in part.
Depending upon the judgments of those involved with your case, unsecured
debts can be paid off for as little as 10 cents on the dollar.
In addition to the general requirements listed above, the repayment plan
must pass three tests:
1) It must be delivered in good faith.
2) Unsecured creditors must be paid at least as much as if a Chapter 7
bankruptcy had been filed. Generally, this is the value of all the nonexempt
property you own (see North Carolina bankruptcy exemptions).
3) All disposable income must be paid into the plan for at least three
years (you may use up to five years in order to meet the second test that
you pay at least as much as in a Chapter 7).
If you have filed Chapter 13, you must begin making your plan payments.
Generally these payments will be withdrawn directly from your wages and
you or your attorney should arrange with the court for these payments
to be deducted from your wages.
Automatic Stay
Once you have filed your paperwork with the bankruptcy court, an automatic
stay immediately goes into effect. This provision prevents creditors from
making direct contact with you or staking a claim on any of your property
from the day of filing forward. This will stop any foreclosure proceedings.
If you have filed Chapter 13, you must begin making your plan payments.
Generally these payments will be withdrawn directly from your wages and
you or your attorney should arrange for these payments to be deducted
from your wages.
Bankruptcy Trustee
Upon filing, the court will assume legal control of your debts and property
not covered by your North Carolina exemptions. A trustee will be appointed to your case
by the court. The job of the trustee is to see that your creditors are
paid as much as possible. This person will thoroughly review your paperwork,
particularly the assets you have in your possession and the exemptions
you wish to claim, and can challenge any element of your case.
341 Meeting of Creditors
Approximately a month after filing, the trustee will call a first meeting
of creditors, which the debtor must attend. This proceeding is also referred
to as the § 341 meeting, named after the corresponding section of
the bankruptcy code. Creditors rarely attend a Chapter 7 bankruptcy meeting;
one or two creditors may attend a Chapter 13 meeting, especially if there
is a question as to the legitimacy of some aspect of the plan. Objections
are typically resolved by negotiation between the debtor or the debtor's
counsel and the creditor. If a compromise can not be reached, a judge
will intervene.
The meeting of creditors typically lasts about five minutes. You will
receive notice of the location of the meeting but you may contact the
court to confirm the address and time. (see North Carolina Bankruptcy Court Directory) Most Chapter 7 filings involve
no non-exempt assets, however, if you filed for Chapter 7 and do have
non-exempt assets, you will have to turn over non-exempt property (or
its fair market value in cash) to the trustee after the meeting.The trustee
will sell this property and distribute the proceeds to your creditors.
If the property isn't worth a great deal or would be hard to sell, the
trustee may decide to abandon the property (and return it to you). Trustees
and creditors have 60 days to challenge the debtor's right to a discharge.
If there are no challenges, you will receive a notice from the court that
your dischargeable debts have been discharged within roughly three to
six months.
Chapter 13 Plan Confirmation
If you filed a Chapter 13 plan will need to attend a hearing before a
bankruptcy judge who will either confirm or deny the repayment plan. If
your plan is confirmed and you make good on it, the balance (if any) on
the dischargeable debts you owe will be eliminated at the end of your
term.
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