Bankruptcy is a legal process that allows individuals and businesses to eliminate or repay their debts under the protection of a federal court. While the thought of declaring bankruptcy may seem daunting, it can provide a fresh start and relief from overwhelming debt. In North Carolina, understanding the bankruptcy laws is crucial for individuals in financial distress who seek to regain control of their finances and start anew.
This blog post will provide an overview of North Carolina bankruptcy laws, including the types of bankruptcy available, eligibility requirements, the bankruptcy filing process, bankruptcy exemptions, the bankruptcy process, debt discharge, and life after bankruptcy. If you’re considering bankruptcy as a solution to your financial difficulties, it’s important to understand how to file for bankruptcy and navigate the process effectively. We’ll also discuss important considerations and provide guidance on how to file for bankruptcy successfully under North Carolina’s jurisdiction.
Types of Bankruptcy in North Carolina

North Carolina offers two types of bankruptcy for individuals: Chapter 7 and Chapter 13. Chapter 7 bankruptcy, also known as “liquidation bankruptcy,” is designed for individuals who cannot repay their debts. In this type of bankruptcy, non-exempt assets are sold to pay off creditors, and the remaining debts are discharged. Chapter 13 bankruptcy, also known as “reorganization bankruptcy,” is a people filing bankruptcy designed for individuals with a regular income who want to keep their assets but need help reorganizing their debts. In this type of bankruptcy, a repayment plan is created to pay off the debts over a period of three to five years.
Qualifying for Bankruptcy in North Carolina
To qualify for Chapter 7 bankruptcy in North Carolina, individuals must pass a means test, which compares their income to the state median income. If their income is below the state median, they are eligible to file for Chapter 7 bankruptcy. If their income is above the state median, they may still be eligible if they pass a second means test that their monthly income and takes into account their expenses and debts. To qualify for Chapter 13 bankruptcy, individuals must have a regular income and their debts must fall below certain limits.
Filing for Bankruptcy in North Carolina
The first step in filing for bankruptcy in North Carolina is to complete credit counseling, which is required by law. Once completed, individuals must file a petition with the local bankruptcy court then, along with supporting documentation such as income and expense statements, a list of assets and liabilities, and tax returns. It is important to avoid common mistakes such as failing to disclose all assets or debts, or transferring assets to friends or family members before filing for bankruptcy.
Bankruptcy Exemptions in North Carolina
Bankruptcy exemptions are assets that are protected from liquidation in a Chapter 7 bankruptcy. North Carolina offers several exemptions, including a homestead exemption exempt property that protects the equity in a primary residence, a personal property exemption that protects household goods and furnishings, and a wildcard exemption that can be used to protect any type of property. It is important to determine which exemptions apply to your case and to work with an experienced bankruptcy attorney to maximize the exemptions available.
Bankruptcy Process in North Carolina
Once a bankruptcy petition is filed, an automatic stay goes into effect, which stops all collection actions by creditors. The bankruptcy trustee is appointed as bankruptcy administrator to oversee the case and review the debtor’s assets and liabilities. A meeting of creditors is held to allow creditors to ask questions about the bankruptcy case. In a Chapter 7 bankruptcy, non-exempt assets are sold to pay off creditors. In a Chapter 13 bankruptcy, a repayment plan is created to pay off debts over a period of three to five years.
Discharge of Debts in North Carolina Bankruptcy
The ultimate goal of bankruptcy is to obtain a discharge of debts, which means the debtor is no longer responsible for repaying the debts. In a Chapter 7 bankruptcy, most unsecured debts such as debt payments as credit card debt, medical bills, and personal loans can be discharged. In a Chapter 13 bankruptcy, some debts may be discharged after the repayment plan is completed. It is important to work with an experienced bankruptcy attorney to maximize the debts that can be discharged in bankruptcy.
Life After Bankruptcy in North Carolina

After bankruptcy, individuals may be concerned about their ability to rebuild credit and obtain future financial opportunities. However, bankruptcy can be a positive step toward financial recovery. It is important to take steps to rebuild credit by obtaining a secured credit card, making timely payments, and monitoring credit reports for errors. Common misconceptions about bankruptcy include the idea that it will permanently damage credit or prevent future financial opportunities. However, with proper planning and discipline, individuals can recover from bankruptcy and achieve financial stability.
Conclusion
Bankruptcy can be a difficult decision, but it can also provide much-needed relief from overwhelming debt. North Carolina bankruptcy laws are designed to help individuals regain control of their finances and start anew. If you are considering bankruptcy, it is important to seek professional assistance from an experienced bankruptcy attorney. They can guide you through the process, help you maximize exemptions, pay creditors, and ensure that your case is handled properly. Remember, bankruptcy is not the end, but a new beginning towards financial recovery.
Frequently Asked Questions

What is bankruptcy and how does it work in North Carolina?
Bankruptcy is a legal process that allows individuals and businesses to eliminate or repay their debts under the protection of the bankruptcy court. In North Carolina, the legal proceeding of bankruptcy is governed by federal law.
How do I know if I am eligible to file for bankruptcy in North Carolina?
To be eligible to file for bankruptcy in North Carolina, you must meet certain requirements under bankruptcy law, including completing a credit counseling course, passing a means test, and meeting residency requirements.
What types of bankruptcy can I file for in North Carolina?
In North Carolina, individuals can file for either Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is a liquidation bankruptcy that allows you to discharge most of your debts, while Chapter 13 is a repayment plan under bankruptcy protection that allows you to repay your debts over a period of three to five years.
How long does the bankruptcy process take in North Carolina?
The bankruptcy process typically takes between three and six months in North Carolina, depending on the type of bankruptcy you file for and the complexity of your case.
Will bankruptcy affect my credit score in North Carolina?
Yes, filing bankruptcy again will have a negative impact on your credit score in North Carolina. However, it is also an opportunity to start rebuilding your credit by making timely payments and using credit responsibly.
Can I keep my assets if I file for bankruptcy in North Carolina?
In North Carolina, certain assets are exempt from bankruptcy proceedings, including your primary residence, retirement accounts, and personal property such as clothing and household goods. However, non-exempt assets and valuable property may be sold to repay your debts.
Will I lose my job if I file for bankruptcy in North Carolina?
No, you cannot be fired from your job for filing for bankruptcy in North Carolina. It is illegal for employers to discriminate against employees or job applicants based on their bankruptcy status.
Can I file for bankruptcy on my own or do I need a lawyer in North Carolina?
While it is possible to file for bankruptcy on your own, it is highly recommended that you seek the advice of an experienced bankruptcy attorney in North Carolina. A top bankruptcy lawyer who can help you navigate the complex legal process and ensure that your rights are protected.
Can I discharge all of my debts in bankruptcy in North Carolina?
While many debts can be discharged in bankruptcy, there are some debts that cannot be eliminated, including certain taxes, student loans, and child support or alimony payments.
How can I get started with the bankruptcy process in North Carolina?
To get started with the bankruptcy process in North Carolina, you should consult with an experienced bankruptcy attorney who can help you determine if bankruptcy is the right option for you and guide you through the process.
Glossary
- Bankruptcy: A legal process where individuals or businesses who are unable to pay their debts can get relief from their creditors.
- Chapter 7: A type of bankruptcy that allows individuals to discharge their debts by liquidating their assets.
- Chapter 13: A type of bankruptcy that allows individuals to restructure their debts and pay them off over a period of three to five years.
- Bankruptcy Trustee: A court-appointed individual who oversees the bankruptcy process and manages the debtor’s assets.
- Automatic Stay: A court order that prohibits creditors from taking any action to collect debts from the debtor once bankruptcy is filed.
- Exemptions: Certain assets that are protected from being liquidated during bankruptcy proceedings.
- Discharge: A court order that releases the debtor from the obligation to pay certain debts.
- Means Test: A test that determines whether an individual or business is eligible to file for Chapter 7 bankruptcy.
- Credit Counseling: A requirement for individuals filing for bankruptcy that involves attending a credit counseling session.
- Secured Debt: Debt that is backed by collateral, such as a mortgage or car loan.
- Unsecured Debt: Debt that is not backed by collateral, such as credit card debt.
- Creditor: A person or company to whom money is owed.
- Debtor: An individual or business who owes money to creditors.
- Bankruptcy Dismissal: A court order that terminates the bankruptcy case without discharging the debtor’s debts.
- Bankruptcy Dischargeability: A determination made by the court as to which debts can and cannot be discharged in bankruptcy.
- Bankruptcy Petition: The formal document filed with the court to initiate bankruptcy proceedings.
- Credit Score: A numerical rating assigned to individuals based on their credit history and debt repayment behavior.
- Garnishment: A court order that allows a creditor to collect money directly from a debtor’s wages or bank account.
- Repossession: The process by which a creditor takes possession of collateral, such as a car or house, when the debtor fails to make payments.
- Foreclosure: The process by which a lender takes possession of a property when the borrower fails to make mortgage payments.