Chapter 7.

Chapter 7 is for people who are having financial difficulties and are not able to re-pay their debts.

Under the changes to the Bankruptcy Code that took effect October 17, 2005, you can usually qualify for a Chapter 7 if your average gross monthly income for the last six months is below your state's Median Income, your gross income less certain expenses shows no discretionary income left, or you can show special circumstances that would allow you to qualify for Chapter 7. In other words, you prove you don't have the money to repay your debts.

Under Chapter 7, your attorney will look to see if you can exempt (protect or keep) some or all of your assets under North Carolina law, or, if you have not lived in North Carolina for the past two years, under the state's exemption law that applies to your case.

Most retirement accounts and pensions are also exempt. Secured property, normally your car and house, may not have a lot of net equity, in which case you can keep it as well, but you will have to keep making the payments for the loans.

A Court representative, called a Trustee, liquidates non-exempt (non-protected) property if you have any, and uses the proceeds to pay your creditors according to priorities of the Bankruptcy Code.

Bankruptcy Glossary