Chapter 7 Bankruptcy

Is it Right for Me?

How to Qualify for a Chapter 7 Bankruptcy

In order to qualify for a Chapter 7 liquidation bankruptcy, you must meet the Means Test. Although this sounds complicated, it really just means that you must fall below the median income level for your area within North Carolina based on the number of people in your household. The median income level for North Carolina is determined by the Census and the IRS. Your household income is determined by averaging your last six months of income. If your household income is above the median income, you may still qualify for Chapter 7 bankruptcy if your disposable income is below the level considered abusive by the court. In order to determine these amounts, you are required to provide our office with pay stubs for you and your spouse for the last six months in addition to other out-of-pocket expenses not deducted from your paycheck, such as child care, charitable contributions, etc. The Means Test is one of the major changes of the 2005 bankruptcy reform law.

Getting Rid of Debt in Chapter 7 Bankruptcy

If you qualify for a Chapter 7 bankruptcy through the Means Test, you must be either: 1) current on your house and/or car payments or 2) willing to surrender your house and/or car to the mortgage company or car loan company if you are behind on either of these payments. Generally, people file Chapter 7 bankruptcies to start fresh and wipe out their unsecured debts such as credit cards, medical bills, previous foreclosures, previous repossessions, etc. After your Chapter 7 bankruptcy has been filed with the bankruptcy court, your creditors will no longer be allowed to call or harass you regarding your debt. Instead, they must contact our office if they have questions – this is required by law. After a few months, assuming all proper steps have been followed, you will receive a discharge of your debts (meaning your debts have been successfully wiped out) and you will be able to begin a fresh financial life.

What Chapter 7 Bankruptcy Cannot Do

It is important to note that there are some debts that a Chapter 7 bankruptcy cannot wipe out. These debts include student loans, taxes, alimony, child support, and damages related to criminal restitution such as damages from drunk driving. If you owe any of these debts and file a Chapter 7 to eliminate your unsecured debts such as credit cards and medical bills, you will still owe the student loans, taxes, alimony, child support, and criminal restitution debts even after you receive a discharge from bankruptcy.

As you can see, Chapter 7 bankruptcy law is complicated and, for most people, often confusing. Please contact Duncan Law today or use our free evaluation form so that we can guide you through the bankruptcy process. In the meantime, if you want to learn even more about Chapter 7 Bankruptcy, see our Chapter 7 Bankruptcy Frequently Asked Questions.