What Happens
If I Decide to File?
Q: What is the Means Test?
A: As part of the bankruptcy process, you are required to complete a Means Test. This process serves two purposes: 1) to determine whether you qualify for a Chapter 7 bankruptcy; and 2) if filing a Chapter 13 bankruptcy, it may establish your payment depending on the monthly disposable income. There are three steps in which you may qualify for Chapter 7 bankruptcy under the means test. The steps are somewhat complicated, so the information below is a summary.
First, it compares your household’s average gross income for the 6 months prior to filing bankruptcy to your state/county’s median monthly gross income adjusted for household size. If your household’s average monthly gross income is below the median, the means test stops here and you will qualify for a Chapter 7 bankruptcy.
Second, if your household’s average monthly gross income is greater than the state/county’s median, the next step will compare your household’s average monthly gross income to expenses, both actual and Internal Revenue Service standard expenses, to determine your household’s monthly disposable income. If your household’s projected disposable income for the next five years (your household’s monthly disposable income times 60 months), is less than $6,000, you should qualify at this step and the means test would stop here.
Third, if your household’s projected disposable income for the next five years exceeds $6,000, a third step is necessary. This step will compare your household’s projected disposable income for the next five years to 25% of your non-priority, unsecured debts. If your household’s projected disposable income for the next five years is less than 25% of your non-priority, unsecured debts, you may still qualify for Chapter 7 bankruptcy.
For updated information, you may go to the U.S. Trustee Program’s Census Bureau Median Family Income by Family Size table.
Q: Can I make a payment plan for my attorney fees?
A: The attorney fee payment plan varies by attorney, but Duncan Law understands it is difficult to make a large payment while undergoing financial struggles. As a result, you may develop your own easy payment plan that meet your needs, whether weekly, monthly, etc. However, the Western and Middle Districts of North Carolina Bankruptcy Courts requires that 100% of the attorney fees in a Chapter 7 bankruptcy be paid prior to filing the bankruptcy. A portion of the attorney fees in a Chapter 13 bankruptcy must be paid prior to filing and the remaining can be added to the bankruptcy payment plan.
Q: Why is there a court fee to file bankruptcy?
A: The federal court charges an administrative fee for services provided by the bankruptcy court. There are various fees charged by the bankruptcy court, but the current fee to open/file a Chapter 7 bankruptcy is currently $299 and a Chapter 13 bankruptcy is $274. The bankruptcy attorney is not compensated or paid by these fees.
Q: Why do I have to take a credit counseling course before I file?
A: With the new bankruptcy laws in 2005, Congress passed legislation requiring a person filing bankruptcy to take a credit counseling course within the 180-day period preceding the date the bankruptcy case is filed with the court. A certificate of completion must be filed with your bankruptcy. Most of the approved credit counseling companies provide the course online and the fees vary by company. However, it is important that you take your credit counseling course from an approved credit counseling company.
Q: Why do I have to take a financial management course after I file?
A: With the new bankruptcy laws in 2005, Congress passed legislation requiring a person filing bankruptcy to take a financial management course after the bankruptcy is filed but prior to the scheduled date of discharge in the bankruptcy. Once the course is completed, a certificate of completion must be filed with the bankruptcy court prior to your debts being discharged. If the certificate of completion is not filed with the court prior to the scheduled discharge date, the bankruptcy court will simply close your bankruptcy without issuing a discharge of debts. This can be costly since you will be required to file a motion with the court to reopen your bankruptcy in order to file the financial management certificate. At this time, the court charges $260 to reopen a Chapter 7 bankruptcy and $235 to reopen a Chapter 13 bankruptcy. Most of the approved credit counseling companies provide the course online and the fees vary by company. It is important that you take your financial management course from an approved credit counseling company.
Q: Where can I take my credit counseling and financial management?
A: It is important to take the course through an approved company or you will be required to retake the course.
Q: Should I obtain a credit report before I file bankruptcy?
A: We strongly recommend you obtain a credit report to supplement what you already know about your creditors. It is easy to forget about a creditor you owed several years ago that is no longer sending bills to you. And from time to time, a creditor will erroneously apply a charge to your credit that you did not incur. This may happen if the person that made the charge has a similar name or even similar social security number. We have also seen clients be the victim of identity theft. It is extremely important to list all your debts, excluding your ongoing utility bills, on your bankruptcy. Recent laws entitle you to a free credit report annually. This site is listed on the Internal Revenue Service website and will not charge you a fee unless you have received a credit report from this site in the past year.
Q: How often can I file bankruptcy?
A: Chapter 7 bankruptcy:
- If you have received a discharge in a previous Chapter 7 bankruptcy, you are not eligible to file another Chapter 7 bankruptcy for eight years. The eligibility is eight years from the date of the filing of the first bankruptcy.
- If you have received a discharge in a previous Chapter 13 bankruptcy, you are generally not eligible to file a Chapter 7 bankruptcy for six years; however, there are some exceptions. You can refer to Title 11, Section 727 for the exceptions.
Chapter 13 bankruptcy:
- If you received a discharge in a previous Chapter 7 bankruptcy, you are not eligible to file a Chapter 13 bankruptcy for four years and receive a discharge.
- If you received a discharge in a previous Chapter 13 bankruptcy, you are not eligible to file another Chapter 13 bankruptcy for two years and receive a discharge.
- It is possible to file a Chapter 13 bankruptcy prior to the time frames listed above, but you will not receive a discharge of your debts. However, this may be a viable option if you are trying to avoid foreclosure on your home or repossession of a car or truck after having received a discharge in a previous bankruptcy filing.
Q: How long will my bankruptcy last?
A: The length of the bankruptcy varies depending on the type:
- A Chapter 7 bankruptcy is discharged approximately 95 – 110 days after the day the bankruptcy is filed. The final decree closing the case can be entered as soon as the discharge date or could last for over a year depending on the circumstances surrounding your bankruptcy.
- A Chapter 13 bankruptcy is discharged after all payments have been made to the Trustee as outlined in the bankruptcy plan which is usually 3-5 years. The final decree closing the case is usually entered 3-4 months after the discharge.
Q: How will my creditors know that I filed bankruptcy?
A: In a Chapter 7 bankruptcy, the court will send a Notice of Meeting of Creditors within a few days of filing, notifying the creditors of your bankruptcy filing and the date of the meeting of creditors. In a Chapter 13 bankruptcy, the attorney for the debtor will send a notice to the creditors within a few days of filing. The court will also send a Notice of Meeting of Creditors but it usually takes longer in a Chapter 13 bankruptcy.
Q: What if I owe alimony or child support when I file bankruptcy?
A: Alimony and child support are not discharged or eliminated in either Chapter 7 bankruptcy or Chapter 13 bankruptcy. There is also no stay imposed on domestic support obligations (alimony or child support) when you file bankruptcy. As a result, you must continue to pay on-going alimony and child support payments. If you are behind on alimony or child support when you file a Chapter 13 bankruptcy, you will want to include the amount you are behind, arrearages, in your Chapter 13 bankruptcy so they can be included in the payments to the Chapter 13 bankruptcy Trustee. It will be very important to notify your county and state child support agency of your bankruptcy filing.
Q: What if I owe student loans when I file bankruptcy?
A: Most student loans are not discharged or eliminated in either Chapter 7 bankruptcy or Chapter 13 bankruptcy. In most cases, you will continue to make direct payments to the student loan creditor after your bankruptcy is filed.
Q: What if I owe taxes when I file bankruptcy?
A: Taxes are not discharged or eliminated in Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, you will need to schedule a payment plan with the taxing agency after your bankruptcy is completed, since most agencies will not discuss a payment plan while you are in bankruptcy. In a Chapter 13 bankruptcy, the taxes owed at the time of filing should be included in your bankruptcy and the payments to the Chapter 13 bankruptcy Trustee. As long as the taxing agency files a proof of claim in your Chapter 13 bankruptcy, the Trustee will pay the past due taxes through your Chapter 13 Plan.
Q: Will I need to go to court during my bankruptcy?
A: Regardless of whether you file Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will be required to attend a meeting of creditors after your bankruptcy is filed. This meeting usually occurs 30 – 45 days after your bankruptcy is filed and is conducted by the bankruptcy Trustee. Your creditors are given notice of this meeting and have the right to attend. This is sometimes called a 341 meeting since it is outlined in Title 11, Section 341 of the United States Bankruptcy Code.
Q: What happens at the meeting of creditors also known as the creditors’ meeting?
A: The meeting of creditors is an opportunity for your creditors to question you about your financial situation and the debts you owe them. Often, there are no creditors at your meeting of creditors. The trustee will conduct the meeting of creditors and will also ask you questions about your bankruptcy paperwork filed with the court.
Q: Who is the Bankruptcy Trustee?
A: A Chapter 7 bankruptcy trustee is a person, usually an attorney, who is appointed by the bankruptcy court to oversee your bankruptcy “estate.” The trustee reviews your estate to determine if there are any non-exempt assets which he/she can liquidate (sell) to pay your creditors for all or a portion of the debt owed to your creditors. Most Chapter 7 bankruptcy cases are “no asset” cases in which there are no assets to liquidate and pay your creditors.
A Chapter 13 bankruptcy trustee also oversees your estate and is the “middleman” in that he receives your monthly Chapter 13 bankruptcy payments and distributes this money to your creditors based on the priority as established in the Chapter 13 bankruptcy plan.
Q: Where does the meeting of creditors take place?
A: The meeting of creditors is held in various locations depending on where you live and the type of bankruptcy you file. You should be provided the location of your meeting of creditors at your bankruptcy signing appointment. However, attached are the websites with the various locations of meeting of creditors in the U.S. Bankruptcy Court for the Western District and Middle District of North Carolina. You should validate the location of your meeting of creditors when you receive the notice from the Court.
Chapter 13 meeting location by Trustee:
Western District
- Warren L. Tadlock: your meeting of creditors will occur at the Trustee’s office. You may go to the Trustee’s website to confirm the location address.
- Steven Tate: your meeting of creditors will occur at the Cleveland County Courthouse, 100 Justice Place, Shelby, NC. You may go to the Court’s website to confirm the Courthouse address.
Middle District
- Kathryn L. Bringle: your creditor’s meeting will occur in the First Floor Creditors Meeting Room, 226 South Liberty Street, Winston-Salem NC
- Richard M. Hutson, II: your creditor’s meeting will occur in the Venable Center, Dibrell Building – Suite 280, 302 East Pettigrew Street, Durham, NC
- Anita Jo Troxler: your creditor’s meeting will occur in the First Floor Creditors Meeting Room, 101 South Edgeworth Street, Greensboro, NC
Chapter 7 meeting location:
Western District
- If your meeting of creditors is in Charlotte, it will be held at 402 West Trade Street, Charlotte, NC. There is no website for this location, but it is directly across the street from the Charles Jonas Federal Courthouse.
- If your meeting of creditors is in Shelby, it will be held at the Cleveland County Courthouse, 100 Justice Place, Shelby, NC. You may go to the Court’s website to confirm the Courthouse address.
- If your meeting of creditors is in Wilkesboro, it will be held at 207 W. Main Street, Wilkesboro, NC. You may go the Court’s website to confirm the Courthouse address.
Middle District
- If your meeting of creditors is in Greensboro, it will be held in the First Floor Creditors Meeting Room, 101 South Edgeworth Street, Greensboro, NC
- If your meeting of creditors is in Winston-Salem, it will be held in the First Floor Creditors Meeting Room, 226 South Liberty Street, Winston-Salem NC
- If your meeting of creditors is in Durham, it will be held in the Venable Center, Dibrell Building – Suite 280, 302 East Pettigrew Street, Durham, NC
Q: What is a Chapter 13 “Plan”?
A: The “plan” is a document used by the Chapter 13 bankruptcy Trustee and the court to administer your bankruptcy. It also gives instructions to your creditors and provides them with basic information about how their claims will be paid. It also includes necessary motions to be filed with the court at the time of your bankruptcy filing.
Q: What is a discharge in bankruptcy?
A: A discharge from bankruptcy means you are no longer legally required to pay the debts owed to creditors which were listed in your bankruptcy and discharged. It is your goal to obtain a discharge in bankruptcy. The court can deny a discharge if you fail to take and file the financial management course prior to the date scheduled for discharge. The time frame for discharge varies by the type of bankruptcy filed.
- In a Chapter 7 bankruptcy, the discharge from the court is usually issued approximately 95 – 110 days from the date your bankruptcy is filed or approximately 65 – 70 days after the first date scheduled for the meeting of creditors. Some debts, including auto loans or mortgage loans, are not discharged if a reaffirmation agreement is signed.
- In a Chapter 13 bankruptcy, the discharge from the court is issued after all plan payments have been made to the Trustee, usually within 3-5 years from filing the bankruptcy, and after a motion for discharge has been filed with the court.
Q: What is a dismissal in bankruptcy?
A: The court may dismiss your Chapter 13 bankruptcy if you fail to make payments to the Trustee or if your debts exceed your ability to pay. If your bankruptcy is dismissed by the court you will be responsible for all your debts and the creditors may proceed with collection actions against you as well as proceed with foreclosure and/or repossession.
Q: What is a Final Decree?
A: The final decree is the last document issued and it closes your bankruptcy case. You are no longer considered to be in bankruptcy once the final decree is issued by the court.
