Chapter 7 Bankruptcy Process Explained

 Posted on March 20, 2019 in Bankruptcy

When you have more debt than you can handle, it can take over your whole life and rob you of your peace of mind. Chapter 7 bankruptcy is one way to discharge eligible debts, give yourself a fresh start, and work toward a more secure financial future. Unlike Chapter 13 bankruptcy, there is no 'payment plan' in Chapter 7. Instead, your debts are simply 'wiped out' upon receiving a discharge. The Chapter 7 bankruptcy process in North Carolina is relatively straightforward for individuals with modest income and assets, and we explain it in this blog.

Are You Eligible?

The court system uses a means test to determine whether or not an individual qualifies for Chapter 7 bankruptcy. The means test analyzes your income and compares it to the state median income. If your income is above the median, you may still file Chapter 7 if you are unable to pay at least $6,000 over the next five years to your creditors. If you can afford more than $6,000 but less than $10,000, you may qualify if you are unable to pay at least 25% of your unsecured debt. A bankruptcy attorney can help you sort this out.

What is Discharged in Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy can discharge many types of personal and consumer debt, including credit cards, medical bills, and personal loans. Secured loans, such as car loans and mortgages, may be discharged if you give up the car or home covered by the loan. Student loans, certain tax debts, alimony, and child support are generally not dischargeable in bankruptcy.

Counseling Requirements

Those filing for bankruptcy must go through an approved financial counseling course. Before filing, you must take a credit counseling class. After filing, you have to go through a financial management course.

Filing for Bankruptcy

The bulk of the work takes place during this step. To file for bankruptcy, you must provide your attorney with substantial documentation of your debts, assets, and income. You have to provide information on any property you've given or sold to family members or friends, monthly living expenses, and any property you own. During this process, your attorney can help you figure out which property you can keep and which property may be sold by the trustee to make payments to creditors.

Meeting of Creditors

After you have submitted your bankruptcy filing, the next step is the meeting of creditors. This takes place about one month after the filing. You, your attorney, and the trustee of your case all attend this meeting. You answer a series of questions that cover your financial situation, assets, income, and debts. Although creditors can attend the meeting, it's uncommon for a creditor to attend a Chapter 7 meeting.

Discharge

After the meeting, your creditors have 60 days to challenge the discharge. If there have been no challenges after 60 days, you should receive an order of discharge from the court within a week or so.

While the process of bankruptcy involves a lot of hard work, it can also help you get relief from overwhelming debt. Learn more about Chapter 7 bankruptcy with a free phone consultation from Blossom Law PLLC. Call us at 704-256-7766.