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Filing Chapter 13 bankruptcy in North Carolina may be one of the best ways for you to get rid of debts while protecting your property. However, there are many things to consider before filing for bankruptcy relief. Ascend wants to help if you are struggling with debts and you are unsure whether Chapter 13 is right for you

The goal of this article is to provide you everything you need to know before filing a Chapter 13 bankruptcy in North Carolina. The following will be covered:

  • Chapter 7 vs. Chapter 13 Bankruptcy in North Carolina
  • Calculating Chapter 13 Plan Payments in North Carolina
  • Means Testing in North Carolina
  • North Carolina Credit Counseling and Debtor Education Courses
  • North Carolina Bankruptcy Exemptions
  • Bankruptcy Courts and Trustees for North Carolina
  • Alternatives to Filing Bankruptcy in North Carolina

Comparing Chapter 7 vs. Chapter 13 Bankruptcy in North Carolina

The Chapter 7 bankruptcy case is intended for individuals and businesses who cannot afford to repay their debts. Therefore, you must “pass” an income test before you can receive a bankruptcy discharge (debt forgiveness) under Chapter 7 of the Bankruptcy Code. However, you might still qualify for a bankruptcy discharge under Chapter 7 even if you “fail” the income test if your debts are primarily business debts.

The Chapter 7 process also might result in the loss of property for a debtor (the person who files the bankruptcy case) if the property has substantial equity above the allowed bankruptcy exemptions. It is important to review income and property restrictions before filing a Chapter 7 bankruptcy case. A Chapter 7 case can provide quick debt relief for individuals who meet the income requirements and do not have other issues that could result in loss of property. 

On the other hand, Chapter 13 bankruptcy cases allow debtors to keep their property and restructure their debts into an affordable monthly payment. Through the Chapter 13 process, a debtor can:

  • Catch up mortgage payments to avoid foreclosures.
  • Stop wage garnishments, levies, and debt-collection lawsuits.
  • Lower car payments to avoid repossessions.
  • Get rid of tax debts and past due domestic support payments (alimony and child support).
  • Eliminate most unsecured debts (medical bills, credit card debts, personal loans, etc.) for pennies on the dollar.

Chapter 13 bankruptcy in North Carolina is available to individuals and couples who have a steady source of income, including individuals who are self-employed, retired, or disabled.

Calculating Chapter 13 Plan Payments in North Carolina

The amount of your Chapter 13 plan depends on your unique financial situation. Several factors are used when calculating Chapter 13 plan

For example, your disposable income is a factor in the amount you must pay to your unsecured creditors through your Chapter 13 plan. In most cases, you must pay all disposable income into your Chapter 13 plan. Your debts are also a factor in the amount of your Chapter 13 repayment plan. Some debts, such as mortgage arrearage (past due mortgage payments) and tax debts, must be paid in full through the bankruptcy plan.

If you have non-exempt equity in assets, your Chapter 13 payment could be higher. You are entitled to exempt some property from your bankruptcy case. Net equity is calculated by subtracting allowed exemptions and valid liens from the value of an asset. If net equity is a positive figure, you may need to pay a higher percentage to your unsecured creditors to keep the property. 

The Ascend free Chapter 13 calculator allows you to estimate your Chapter 13 payments to begin exploring whether filing a Chapter 13 bankruptcy in North Carolina is the best way for you to get out of debt. You can estimate your payment using the calculator below:

Means Testing in North Carolina

When you file a Chapter 13 bankruptcy in North Carolina, you are required to complete numerous bankruptcy forms. The Means Test is a federal bankruptcy form that calculates your average monthly income, annual median income, and disposable income. 

Calculating Average Monthly Income (AMI)

Your average monthly income or AMI is calculated based on your household income for the past six months. To calculate your AMI, add all income received during the six months before filing bankruptcy and divide by six. Your AMI is multiplied by 12 to calculate your annual median income.

Median income is used to determine whether you must file a 60-month bankruptcy plan. If your median income is higher than the average median income of households of the same size in North Carolina, you are required to enter a 60-month Chapter 13 plan. If your median income is below the state median income level, you might qualify for a 36-month Chapter 13 plan.

The figures used to measure median income change every few months to reflect current household income in North Carolina. You can view the median income figures for North Carolina by clicking here. The current median income figures are for cases filed on or after May 1, 2020 and can be found below. Please observe that households greater than 9 persons would add $9,000 for each household member..

# of PeopleAnnual Income
1$48,772
2$62,050
3$69,162
4$87,505
5$96,505
6$105,505
7$114,505
8$123,505
9$132,505

Calculating Disposable Income for a Chapter 13 Plan

The second part of the Means Test calculates your disposable income. As described above, disposable income is one of the factors used when calculating a Chapter 13 plan payment. Your disposable income is the amount of money you have each month after paying normal living expenses, such as car payments, mortgage payments, utilities, and insurance payments. Required payroll deductions are also deducted from your average monthly income when calculating disposable income. 

However, the Means Test restricts the amount of money you may deduct for some living expenses, such as food, clothing, cleaning supplies, and out-of-pocket health care expenses. The United States Trustee’s Office maintains a list of the current allowable living expenses that are subject to restrictions. Furthermore, some living expenses may not be allowed, such as expensive gym memberships.

The Means Test can be complicated in some cases. If you have special expenses or questions, you may want to consult an experienced bankruptcy attorney.

North Carolina Credit Counseling and Debtor Education Courses

As part of your Chapter 13 bankruptcy in North Carolina, you must complete two bankruptcy courts. The Credit Counseling Course must be completed before you file your bankruptcy petition. The Debtor Education Course (or Financial Management Course) is completed after you receive your bankruptcy case number.

All courses must be completed with a company that is approved to offer courses in the bankruptcy district that oversees your case. Because North Carolina does not participate in the United States Trustee Program, the list of approved bankruptcy course providers are listed on the websites for each Bankruptcy Administrator in North Carolina.

Links to the websites for the approved courses are:

North Carolina Bankruptcy Exemptions

Bankruptcy exemptions are used to protect net equity in property during a bankruptcy case. As discussed above, non-exempt equity can result in a higher Chapter 13 plan. It is important to carefully analyze all available bankruptcy exemptions to choose exemptions that protect as much equity in your property as possible. 

Federal Bankruptcy Exemptions

Most federal bankruptcy exemptions are explained in 11 U.S.C. §562. You can view a list of the federal bankruptcy exemptions published on the NCLC website. These figures are subject to change. However, North Carolina has opted out of the federal bankruptcy exemptions. You must use North Carolina exemptions if you have resided in North Carolina for at least 730 days before filing your bankruptcy petition.

If you have not resided in North Carolina for two years, you may need to use the bankruptcy exemptions for the state in which you resided for the greater part of 180 days before the 730-day residency requirement. If that state allows you to choose federal exemptions, then you might be able to choose federal exemptions in that situation. 

Bankruptcy Exemptions for North Carolina

Most North Carolina bankruptcy exemptions are described in N.C. General Statutes Chapter 1C §1601. However, because the amounts of the North Carolina bankruptcy exemptions may change, you should always check for revisions and updates to ensure you use the most current figures.

Some common bankruptcy exemptions under North Carolina law include:

  • Homestead exemption – $35,000 in a residence ($60,000 if the debtor is 65 years of age or older)
  • Motor vehicle – $3,500 in one motor vehicle
  • Household goods and furnishings, including clothing and appliances – $5,000 for the debtor and $1,000 for each dependent up to four dependents
  • Tools of the trade – $2,000 for tools used in a business or occupation 

A debtor may also claim other exemptions for wages, retirement plans, pensions, public benefits, prescribed health aids, life insurance, and domestic support payments. 

There is also a wild card exemption available. A debtor may use up to $5,000 of any unused portion of the homestead exemption to protect the equity in other assets. 

Bankruptcy Courts and Trustees for North Carolina

North Carolina is divided into three bankruptcy districts:

  • Western District of North Carolina

The Western District of North Carolina has court locations in Shelby, Charlotte, Statesville, and Asheville. 

  • Eastern District of North Carolina

The Eastern District of North Carolina has court locations in Fayetteville, Raleigh, New Bern, Greenville, and Wilmington.

  • Middle District of North Carolina

The Middle District of North Carolina has court locations in Greensboro, Winston-Salem, and Durham.

Bankruptcy Administrators in North Carolina

North Carolina does not have Chapter 7 or Chapter 13 trustees under the United States Trustee program. It utilizes a Bankruptcy Administrator Program. Each bankruptcy district has a Bankruptcy Administrator that usually appoints trustees to administer individual bankruptcy cases and oversees those trustees. 

You can find more information about the North Carolina Bankruptcy Administrator Program for each district by using the following links:

Alternatives to Filing Bankruptcy in North Carolina

Filing a Chapter 13 bankruptcy in North Carolina may not be the best way for you to get out of debt. There could be a non-bankruptcy debt solution that works better for you.

Before you decide to file Chapter 13, review our Debt Settlement Guide and Debt Management vs. Debt Settlement article. These resources provide information about ways to eliminate debts without filing bankruptcy. If debt settlement or debt consolidation sounds good, read more information in our FAQs about debt settlement. You can also compare debt consolidation to debt settlement to help you decide if either of these alternatives to Chapter 13 would be better in your situation. 

The Savvy Debt Payoff app may help you organize your finances and track debt payoff in one convenient, easy-to-use app. 

Should I Pursue A Chapter 13 Bankruptcy Case in North Carolina?

If you have any questions, please contact Ascend. Call or text us at 833-272-3631 for more information about our resources for resolving debt problems. At Ascend, our goal is to give you the information, resources, and tools you need to get out of debt and on your way to a better financial future.

Post Author: Ben Tejes

Ben Tejes is a co-founder and CEO of Ascend Finance. Before Ascend, Ben held various executive roles at personal finance companies. Ben specializes in Chapter 13 Bankruptcy, Debt Settlement, Chapter 7 Bankruptcy and debt payoff methods. In his free time, Ben enjoys spending time going on adventures with his wife and three young daughters.

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