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Written by Attorney Eva Bacevice.
Updated September 3, 2020
Deciding whether to file a Chapter 7 bankruptcy is a big decision with a lot of factors, not the least of which is whether you actually qualify. To be able to file a Chapter 7, you need to pass the bankruptcy Means Test in North Carolina. The Means Test is part of the 2005 reform to the federal Bankruptcy Code. Congress enacted it due to a concern that there were people seeking Chapter 7 relief even though they could afford to pay back some, or even all, of their debts. The Means Test is intended to ensure that only people who truly need the relief of a Chapter 7 bankruptcy are able to obtain it. You can pass the Chapter 7 Means Test in one of two ways. The first way is income-based. If your current monthly income (based on an average from the last 6 months) is less than the median income for your family size in North Carolina, then you pass the Chapter 7 means test and don't need to take any further steps. If your income is above the median level for your family size, you can still qualify by going through the extended Means Test analysis, which considers your income and your expenses. If that calculation shows that, after taking into account your reasonable monthly expenses, you have little or no disposable income left to pay your debts, then you will qualify for a Chapter 7.
North Carolina Median Income Levels
North Carolina Median Income Standards for Means Test for Cases Filed On or After May 1, 2021
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Discharge in Bankruptcy for North Carolina
A North Carolina bankruptcywill result in a discharge of some (or all) of your debts. This means that you are able to walk away from all of your unsecured debts, like credit cards and medical bills, and start fresh. There are some debts which are non-dischargeable, such as child support, that do survive the bankruptcy, but for most debtors the bulk of their bills are eliminated in their North Carolina bankruptcy case. In order to receive your discharge, you will need to make certain that you have completed all the necessary steps, filed your paperwork and attended your Meeting of Creditors. Once your Meeting of Creditors’ is done, it is usually just a matter of waiting for approximately 60 days to receive your North Carolina bankruptcy discharge.
North Carolina Means Test Calculator
If you do not pass the Chapter 7 Means Testbased on the income limits alone, you will need to go through the extended Mean Test analysis to find out if you qualify. When you do so, it is very important to use an up-to-date North Carolina Means Test calculator. You will be able to find plenty of Chapter 7 Means Test calculators online, but it is difficult to know which have the most current information. You can rest assured, however, that the information contained in Upsolve’s Means Test calculator is kept current to the day for North Carolina and all other states. Using the most current figures for what constitutes “reasonable monthly expenses” could make the difference between qualifying or not, so make sure to give yourself the best opportunity to pass.
What Happens If I Fail The Means Test for North Carolina
If you fail the extended bankruptcy Means Test in North Carolina it is worth taking a second look, as it’s easy enough to forget to include an annual expense if you do not think of it as a “regular” one. This could be the case for charitable donations - even if you give at the end of the year, you can average it out into an allowable monthly expense deduction on your bankruptcy means test in North Carolina. Also make certain to include all allowable expenses, like helping take care of an elderly family member, whether or not they live with you. The next thing you should consider is whether there are any big changes coming up in the near future. If you are going to have an aging relative move in or welcome a new baby any time soon that will increase both your family size and the amount you can reasonably spend on food and household goods. What if your income isn’t always the same? Maybe your work is seasonal and tied to the seafood industries? If so, it can make a difference whether you are trying to file right after the busy season or a few months later as that impacts your income for purposes of the Chapter 7 means test. If not, keep in mind that you can also explore a Chapter 13 bankruptcy as an alternative form of North Carolina bankruptcy relief and consider seeking a free consultation with a local bankruptcy lawyer. This will help you to make sure you didn’t inadvertently miss anything in your Chapter 7 means test and to learn more about how a Chapter 13 may provide you with relief instead.