Bankruptcy / North Carolina / Chapter 7

Chapter 7 Bankruptcy North Carolina: 3 Things You Need to Know

Written by Ben Tejes
Updated Nov 27th, 2021

You may have experienced a financial hardship and are considering filing bankruptcy in North Carolina, specifically Chapter 7 bankruptcy. 

There are 3 important things to consider when pursuing Chapter 7 bankruptcy in North Carolina:

  1. Do you qualify for a Chapter 7 bankruptcy and what does it cost?
  2. What are the alternatives to Chapter 7 bankruptcy?
  3. What is specific need-to-know Chapter 7 bankruptcy information for North Carolina?

Chapter 7 bankruptcy is the most common bankruptcy in the United States. For example, I would not be surprised if the majority of the 7,037 bankruptcies filed in North Carolina in the year ending June 30th, 2021 were Chapter 7 bankruptcy.

If you would rather see than read, feel free to estimate qualification and cost using the North Carolina Chapter 7 Calculator below.

Let’s get started to understand why Chapter 7 is a popular choice in North Carolina.

1) How Chapter 7 Bankruptcy Works in North Carolina

Many people we speak with care about two things:

  1. How fast they can get relief from their debt burden.
  2. How much is costs to get out of their debt burden?

When comparing debt-relief options, Chapter 7 bankruptcy often wins in both categories over alternatives such a Chapter 13 bankruptcy, debt negotiation, debt management, and debt payoff planning. Let’s explore those variables in greater detail.

How Fast Do You Get Relief in A Chapter 7 Bankruptcy in North Carolina

You can often get a Chapter 7 bankruptcy discharge in as little as 120 days in North Carolina. That is the typical time it takes to complete a no-asset Chapter 7 case in North Carolina. No-asset generally means that you do not own a home or other assets that may be above the North Carolina bankruptcy exemptions.  

How Much Does It Cost To File Chapter 7 bankruptcy in North Carolina

The Chapter 7 bankruptcy cost nationwide tends to be between $500 and $3000. That said, Chapter 7 bankruptcy cost in North Carolina is different. 

The Chapter 7 bankruptcy cost may even be different if you are filing in Greensboro vs. Raleigh. For example, you may pay a Chapter 7 bankruptcy attorney fee of $1,500 in Greensboro, but pay a bankruptcy attorney fee of $1,125 in Charlotte.

You should check the cost to file Chapter 7 bankruptcy in North Carolina for specific information about the cost in your city.

Also, there are instances where the cost to file bankruptcy can be reduced based on a filing fee waiver. You should consider seeing the information related to North Carolina filing fee waiver.

If you are a more visual learner, see the video below covering Chapter 7 bankruptcy in North Carolina.

So, How Do I Qualify For Chapter 7 Bankruptcy in North Carolina?

Chapter 7 bankruptcies are intended for people who cannot afford to pay any portion of their debts. However, you must first pass an income evaluation to qualify for a bankruptcy discharge (forgiveness of debt) in Chapter 7.

If you pass the North Carolina bankruptcy means test (which you can estimate below), you can erase most unsecured debts through Chapter 7. Unsecured debts discharged in Chapter 7 include medical bills, personal loans, some old income tax debt, old utility bills, credit card debts, and most personal judgments. Unsecured creditors hold debts that are not secured by collateral. 

What about secured debts in Chapter 7?

If, however, you want to get rid of secured debts, like car loans and mortgages in Chapter 7, you need to surrender the asset to the creditor. The creditor must accept the asset as full payment of the amount owed. 

Let’s go into how you qualify for Chapter 7 bankruptcy.

IMPORTANT: Chapter 7 Qualification via North Carolina Means Test

An important element in filing for bankruptcy relief is the Bankruptcy Means Test. The Means Test is a bankruptcy form that calculates your average monthly and annual income. The test compares your income against the median income of other households in North Carolina.

If your average annual income or median income is below the North Carolina median income, you may qualify for a bankruptcy discharge under Chapter 7. You can estimate whether you qualify for a Chapter 7 bankruptcy using the free North Carolina Chapter 7 Bankruptcy Means Test Calculator below.

 

Help! My Income Exceeded The Chapter 7 Means Test Allowable in North Carolina

If your median income is above the state median income, you may need to look at part 2 of the means test or at an alternative. 

The Means Test is a two-part test, so it is not a simple pass-fail test. If you “fail” the first section, you can “pass” the second section and still qualify under Chapter 7.  

You can learn more about passing the Chapter 7 means test when income exceeds the median.

Chapter 7 Bankruptcy North Carolina Income Limits

The North Carolina median income figures for the Means Test are adjusted periodically, based on IRS and Census Bureau data. North Carolina median income for bankruptcy cases filed on or after May 15, 2021, is:

# of PeopleAnnual Income
1$51,278
2$66,859
3$72,958
4$90,039
5$99,039
6$108,039
7$117,039
8$126,039
9$135,039

For North Carolina households with more than 9 members, add $9,000 for each additional family member. You should always double-check the US Trustees website for the most current figures when calculating the Means Test.

Will I lose my belongings if I file Chapter 7 bankruptcy? Understand North Carolina bankruptcy exemptions

Bankruptcy exemptions protect the equity in your property in a bankruptcy case. Likewise, property not protected by bankruptcy exemptions may be sold in a Chapter 7 liquidation case. Note also that for Chapter 13 cases, non-exempt equity in the property can increase the bankruptcy plan payment. 

The most important asset most people like to protect is their home. See the North Carolina bankruptcy homestead exemption below.

The homestead exemption is often broken down by age and whether you are married. 

  • Single and under 65: $35,000
  • Single is 65 or older: $60,000
  • Married and under 65: $70,000
  • Married is 65 or older: $120,000

North Carolina specific homestead bankruptcy exemption text: “N.C. Gen. Stat. § 1C-1601(a)(1). Real or personal property, including co-op, used as residence to $35,000. ($60,000 if 65 or older and spouse is deceased); up to $5,000 of unused portion of homestead may be applied to any property.” (Source)

It is important to review additional North Carolina bankruptcy exemptions and choose those exemptions that best protect your assets.

The federal bankruptcy exemptions are detailed in 11 U.S. Code §522. The National Consumer Law Center maintains a list of federal bankruptcy exemptions on its website. North Carolina is a state that does not allow you to use federal bankruptcy exemptions

Always check that you use the most current information available when analyzing bankruptcy exemptions. 

Chapter 7 Bankruptcy North Carolina Pros and Cons

Like any debt relief option, Chapter 7 bankruptcy in North Carolina has pros and cons to consider. For example, you may own a home in Charlotte with equity well above the exemption. In a Chapter 7 bankruptcy, you may be at risk of losing your home. Let's cover the different pros and cons.

Pros

  1. Often the least expensive debt relief options
  2. Receive discharge in about 120 days
  3. Potentially keep your home and belongings
  4. Stop debt collection lawsuits
  5. No more deficiences
  6. It can relieve an unaffordable unsecured debt

Cons

  1. Income requirements for qualification
  2. Potentially lose your home and other belongings when above the exemption
  3. Negative credit report impact for 10 years
  4. Negative credit score impact (in some situations)
  5. Non-dischargeable debt
  6. Difficult to prevent foreclosure
Now that we've covered the pros and cons, let's chat about the Chapter 7 bankruptcy alternatives in North Carolina.

2) Alternatives to Chapter 7 Bankruptcy in North Carolina

Let’s cover the Chapter 7 bankruptcy alternatives in North Carolina in case you do not qualify for Chapter 7 bankruptcy, have too many assets, or do not wish to pursue Chapter 7 bankruptcy.

a) Chapter 13 Bankruptcy in North Carolina

For those who make above the income limit for Chapter 7, debt relief can still come through a filing a Chapter 13 bankruptcy. A Chapter 13 Bankruptcy in North Carolina case allows you to restructure your debts into an affordable monthly plan. By restructuring debts, many people can afford to keep their homes and vehicles under Chapter 13.

Chapter 13 stops foreclosures, repossessions, and wage garnishments. Chapter 13 bankruptcy also allows you to pay back mortgage payments, past-due car payments, and tax debt over three to five years through a bankruptcy plan. In addition, North Carolina may also allow you to reduce unpaid child support and alimony. However, you must resume your normal domestic support payments to remain in Chapter 13.

In a Chapter 13 plan, some debtors (the person filing the bankruptcy case) can lower their car loan payments and erase second mortgages, if they meet certain requirements. 

Can you afford Chapter 13 bankruptcy?

Let’s say you do not qualify for a North Carolina Chapter 7 bankruptcy and are wondering whether you should pursue a Chapter 13 bankruptcy. Can you afford it? It may be odd to ask whether you can afford bankruptcy, but it’s an important question to ask.

To understand whether you can potentially afford a Chapter 13 bankruptcy, you may want to take the Chapter 13 calculator below to estimate whether you can afford the monthly payment. 

b) Debt Settlement in North Carolina

Debt settlement can be less expensive than both Debt Management and Debt Payoff Planning because the debt management company is negotiating a lower amount on your total debt. We covered the pricing estimate differences in our article covering debt management vs debt settlement.

You should consider the following if you are pursuing debt settlement: Credit score impact, debt settlement pros and cons, and avoiding Debt Settlement companies with red flags.

c) North Carolina Debt Management

Debt settlement companies negotiate lower amounts. Debt management companies negotiate lower interest rates. This is the key distinction. Often these programs last 3 or 5 years. This option is often more expensive than debt settlement and some creditors such as personal loan lenders may not work with the debt management company. There may be debt management credit score implications as well.

Who may debt management in North Carolina best for? Debt management may be best for those that have all high-interest credit card debt, and a reduction from 22-30% interest rate to a 10% interest rate would continue to make the debt affordable.

d) North Carolina Debt Payoff Planning

You may be able to get out of debt through debt payoff planning, which is often a combination of trying to reduce expenses and putting extra cash into specific debts to avoid interest. You may not be able to do this because of the size of the financial hardship, but if you are interested, we build the Savvy debt payoff planner to help prioritize your debts. The app saves about $2,000 in interest on average by using the savvy debt payoff method instead of the snowball debt payoff method.

3) Specific North Carolina Chapter 7 Bankruptcy Information:

Let’s say you went through the 2 steps above and are now considering whether Chapter 7 bankruptcy is the right choice for you. Let’s go through some attributes about filing Chapter 7 bankruptcy in North Carolina that would be helpful to consider.

North Carolina Chapter 7 Bankruptcy Credit Counseling and Debtor Education Courses

When you file for bankruptcy relief under Chapter 7 bankruptcy, you must complete two bankruptcy courses to receive a bankruptcy discharge. This includes a credit counseling course prior to filing a bankruptcy case, and a debtor education course after filing. See below the approved courses for North Carolina

The United States Trustee’s office has approved state-specific companies that offer bankruptcy courses. You can access a list of companies in North Carolina offering bankruptcy courses on the UST website. Both courses are available online for a small fee.

North Carolina Chapter 7 bankruptcy Court Locations

Many 341 meetings of creditors have been over the phone or over Zoom due to the pandemic. That said, you may want to see where the courthouse is in North Carolina if there are any meetings that need to take place in person. Below are the court locations for filing bankruptcy based on the bankruptcy district.

Eastern District

  • Clerk of Court
    PO Box 25670
    Raleigh, NC 27611

Middle

  • 324 W. Market Street
    Greensboro, NC 27401-2544
  • 251 N. Main Street
    Winston-Salem, NC 27101
  • 323 E. Chapel Hill Street
    Durham, NC 27702

Western

  • 401 West Trade Street, Room 210
    Charlotte, NC 28202
  • 100 Otis Street, Room 309
    Asheville, NC 28801
  • 200 West Broad Street, Room 304
    Statesville, NC 28677


Chapter 7 Bankruptcy Trustees North Carolina

Below are the Chapter 7 bankruptcy trustees in North Carolina broken out by bankruptcy district. You can also find the list here

The United States Trustee Program does not administer bankruptcy estates in North Carolina at this time. Questions about cases in North Carolina should be addressed to:


The Administrative Office of the U.S. Courts

Bankruptcy Judges Division

1 Columbia Circle, N.E., Suite 4-250

Washington, DC 20544

Phone: (202) 502-1900


In addition to the above, review North Carolina local bankruptcy rules before filing a bankruptcy case. Some local rules may differ slightly from the Federal Bankruptcy Rules.

Conclusion

Hopefully, now you know much more about Chapter 7 bankruptcy in North Carolina. You can take the Chapter 7 bankruptcy means test calculator below if you’re interested to estimate qualification and cost.

For more information about Chapter 7 bankruptcy, check out our Chapter 7 bankruptcy process

Most people work with a bankruptcy attorney in both Chapter 7 and Chapter 13, but there is the option to file without a bankruptcy attorney. Read filing bankruptcy without an attorney to learn how.