Facing overwhelming debt can feel like navigating through a dense forest with no clear path ahead. In North Carolina, Chapter 7 bankruptcy offers individuals a way out of this financial thicket by liquidating assets to pay off debts.
Understanding the process and eligibility requirements is necessary when you are considering this option. It is also worth examining the possibility of Chapter 13 bankruptcy as an alternative to Chapter 7.
Eligibility for Chapter 7 bankruptcy
To qualify for Chapter 7 bankruptcy in North Carolina, you must meet certain eligibility criteria. You must first pass the means test, which compares your income to the state median to determine if you have enough disposable income to repay debts. Additionally, you must undergo credit counseling within six months before filing for bankruptcy.
Key steps in Chapter 7 bankruptcy filing
The process of filing for Chapter 7 bankruptcy involves several key steps. First, you gather the relevant financial documents. These include income statements, tax returns and a list of assets and liabilities. Then, you need to complete credit counseling and fill out the necessary bankruptcy forms, disclosing all financial information accurately. After filing, an automatic stay goes into effect, halting most collection actions by creditors. Finally, a bankruptcy trustee will proceed to oversee the liquidation of assets and distribution of proceeds to creditors.
Chapter 13 bankruptcy as a fresh start
If you have a steady income but are struggling to repay debts, Chapter 13 bankruptcy offers a viable solution. Unlike Chapter 7, Chapter 13 involves creating a repayment plan to gradually pay off debts over three to five years. This option enables you to keep your assets while restructuring your finances.
Benefits of Chapter 13 bankruptcy
Chapter 13 bankruptcy provides several benefits for North Carolinians facing debt troubles. One major advantage is the opportunity to keep valuable assets, such as a home or car, while catching up on missed payments through the repayment plan. Additionally, Chapter 13 can stop foreclosure proceedings and prevent creditors from repossessing property.
The United States Courts report that there were a total of 452,990 bankruptcy filings in the year ending December 2023. This figure illustrates how common bankruptcy is among those struggling with debt, and how viable it can be as a solution.