A Chapter 7 bankruptcy case can be a confusing and complex process that takes about three-month to complete. Rest assured however, we will be there with you at every step of the way. Please complete our completely confidential intake formand someone from our office will call you within 24 hours to discuss your case.
Generally, individuals, sole proprietors and other forms of business entities (excluding corporations) can file a Chapter 7 bankruptcy if a Chapter 7 bankruptcy has not been filed within the previous eight (8) years or a Chapter 13 bankruptcy within the previous six (6) years.
If you are married, and your spouse has filed a Chapter 7 bankruptcy within the previous 8 years or a Chapter 13 bankruptcy within the previous 6 years, then you will not be allowed to file jointly with your spouse.
Which Debts Are Discharged?
In a Chapter 7 bankruptcy, most credit cards, medical, and legal debts are discharged, as are most court judgments and loans. Most of our clients are able to discharge all their debts.
Some types of debts are not discharged in a Chapter 7 bankruptcy. The most common of these are:
- Debts incurred to pay nondischargeable taxes
- Court-imposed fines and restitution
- Child support and alimony obligations
- Debts owed to an ex-spouse as a result of a divorce or separation
- Loans owed to a retirement plan, such as a 401(k)
- Student loans – some exceptions may apply
- Federal and state taxes that were first due less than three years before your bankruptcy filing date
- Debts for personal injuries or death resulting from your drunk driving
Some types of debts will survive your bankruptcy, but only when the creditor seeks and obtains an order from the bankruptcy court excluding the debt from your bankruptcy. If you have debts arising from your fraudulent actions, recent credit card charges for luxuries, and willful and malicious acts causing personal injury or property damage, please notify us at our consultation.
What Happens to Your Property?
North Carolina has laws that allow you to keep all or most of your equity in the property when you file for Chapter 7 bankruptcy. With a couple of major exceptions (including most pensions and retirement plans), when you file for bankruptcy all the property you own or are entitled to receive becomes part of your bankruptcy estate and technically owned by the bankruptcy trustee.
In addition, the property you sold within the previous two years for less than its value, and certain types of property you have come to own within the six-month period after we file your case are also considered part of your bankruptcy estate.
You can keep your home if:
- You are current on your mortgage; and
- You have no significant nonexempt equity in the house
- $35,000.00 for individuals
- $60,000.00 for married couples filing jointly
If you are upside down on your home, you have no nonexempt equity in the house. Because there is no nonexempt equity, the trustee will not be interested in selling the house unless you are behind on your mortgage payments. If you are behind, although the trustee will not sell your house, your mortgage lender may choose to foreclose and will probably be ale to get permission from the bankruptcy judge to proceed.
If you have a second mortgage and are so upside down that the value of the house does not even cover the first mortgage, you will probably be able to keep your house even if you are not current on your second mortgage, but you must be current on your first mortgage. The reason is that if there is no equity available to pay off the second mortgage, the second mortgage holder will have no economic incentive to attempt a foreclosure.
You can keep your car if:
- You are current on your car payment and
- You have less than $3,500.00 of equity in your car.
If you have more than one car, talk to us and we may be able to help you save it also.
Cost and Fees
The filing fee for a Chapter 7 bankruptcy is $306.00. There are also other minimal fees needed for a pre-filing credit counseling course (approximately $50.00) and a personal financial management course (approximately $20.00).
Pre-filing Credit Counseling Requirement
Before you can file your papers, you must have completed a two-hour credit counseling session from a nonprofit agency, which typically costs about $50.00 or less. We recommend our clients use Hummingbird.org to complete this requirement. For those of our clients who are not internet savvy, a counselor is also available over the telephone, and in person. Please see here https://www.ncwba.uscourts.gov/credit.html for a complete list of approved agencies.
Personal Financial Management Course
You are required to take an approved personal finance course before you can get your discharge of debts in a Chapter 7 bankruptcy. You must complete this course promptly so that we can file the necessary paperwork with the court no later than 45 days after the date on which your creditor’s meeting was first scheduled. If you miss this deadline, the court may close your case without discharging your debts.
The agencies providing this service must be approved by the Office of the U.S. Trustee and must offer approximately two hours of required curriculum. We recommend our clients use Hummingbird.org to complete this requirement.
The Creditor’s Meeting
About 30 days after we file your papers, you will be required to attend a hearing known as the creditors’ meeting. A bankruptcy trustee, the official appointed to handle your case for the court, conducts the meeting. A U.S. trustee may also attend your meeting and may ask you questions that bear on your possible ineligibility for Chapter 7 because of your income level. The primary reason for this meeting is to have you affirm under oath that the papers we have filed for you are complete, honest and accurate to the best of your knowledge. The trustee may also question you about other matters at this meeting. You will be represented by us at this meeting.