You are considering filing bankruptcy in North Carolina and understand that you may have to qualify based on means testing. You can qualify for Chapter 7 bankruptcy in North Carolina in two different ways, so the purpose of this article is to share how to pass the means test for Chapter 7.
- Your current household income is lower than the median income for your family in North Carolina. Estimate qualification using North Carolina bankruptcy means test calculator below.
- Your current household income is higher than the median income, but you have expenses that may be deductible. Estimate the above median bankruptcy means test calculator below as well.
You may only have to take one calculator if your income level is lower than the North Carolina Chapter 7 bankruptcy income level.
Means Test
There are three US bankruptcy forms to estimate qualification. The first North Carolina bankruptcy means test calculator below is based on the Chapter 7 Statement of Your Monthly Income form. You can use the bankruptcy means test calculator below that mirrors that bankruptcy form to help estimate qualification, how much bankruptcy costs, and pros and cons.
How It Works
According to the United States Trustees office, the means test is a standardized bankruptcy form that you complete to file for bankruptcy.
You can think of it as an income test.
The bankruptcy forms calculate your average monthly income. It then annualizes that figure to calculate your average annual income.
Here are some important things to note about the bankruptcy means test:
- The means test applies to your entire household income even if your spouse is not filing with you. This may be different if you are legally separated.
- The household income is used for the bankruptcy means test in North Carolina. As such, it compares your average household income to other household incomes in North Carolina. The figures used for the means test come from the Census Bureau data.
- Here’s the specific language used for the average monthly income used for the North Carolina bankruptcy means test.
- Fill in the average monthly income that you received from all sources, derived during the 6 full months before you file this bankruptcy case. 11 U.S.C. § 101(10A). For example, if you are filing on September 15, the 6-month period would be March 1 through August 31. If the amount of your monthly income varied during the 6 months, add the income for all 6 months and divide the total by 6. Fill in the result. Do not include any income amount more than once. For example, if both spouses own the same rental property, put the income from that property in one column only. If you have nothing to report for any line, write $0 in the space.
- If your income is variable, you may consider using an average income calculator.
- Please note incomes that are excluded from the means test.
North Carolina Bankruptcy Income Limit
Below are the household income levels for North Carolina for bankruptcy cases filed on or after November 1, 2024. The figures change every 6 months or so. If your household size is greater than 9, you would add $9,900 for each additional family member.
| # of People | Annual Income |
|---|---|
| 1 | $61,789 |
| 2 | $78,014 |
| 3 | $92,035 |
| 4 | $110,533 |
| 5 | $120,433 |
| 6 | $130,333 |
| 7 | $140,233 |
| 8 | $150,133 |
| 9 | $1160,033 |
What Is Considered Income?
- Salaried income
- Spousal income (in a joint case or if not legally separated)
- Hourly and overtime income
- 1099 Income (Uber, Lyft)
- Net Rental Income
- North Carolina government income
- Child support and Alimony
- Dividend, Interest, and Royalties
- Pension and Retirement Income
- Net business income
- Annuity payments
- Unemployment compensation
- Worker’s Compensation Benefits
What Is Considered In Household Size?
What If Your Income Is Above The Limit?
You may have taken the calculator above and your income is above the household income level for North Carolina. If so, you may still qualify based on the next two means test forms: 1. Statement of Exemption from Presumption of Abuse Under §707(b)(2) and 2. Chapter 7 Means Test Calculation. The second portion of the means test allows you to deduct allowable monthly expenses from your current monthly income (CMI) to calculate your disposable income. The expenses used are a combination of national and North Carolina expenses.
As a note, disposable income is the income available after expenses that may be used to repay your debts. If your disposable income is below a specific amount, you may still qualify for a Chapter 7 bankruptcy.
The North Carolina above-median bankruptcy means test calculator below uses both forms to help you determine allowable expenses to estimate Chapter 7 qualification.
Allowable deductible expenses
Here are the certain expenses that you may deduct actual expenses on the second part of the bankruptcy means test.
- Mandatory employment deductions, such as union dues, retirement plans, and uniforms
- Health and disability insurance premiums
- Income taxes
- Child Care expense
- Term life insurance premiums
- Secured debt payments for your car and home
- Alimony and child support payments
- Charitable contributions (limited to a percentage of your income)
You may also deduct other expenses for special circumstances. The below expenses are limited and based on the number of individuals in your household. You can refer to the current national standards for the maximum amounts allowed for the below expenses.
- Housekeeping supplies
- Clothing
- Food
- Personal care services and products
- Housing and utility expenses
- Transportation expenses
- Out of pocket healthcare expenses
What Happens If You Fail the Bankruptcy Means Test?
If you fail the bankruptcy means test, you still have options.
For example, you can consider a Chapter 13 bankruptcy in North Carolina. You may also consider bankruptcy alternatives such as debt settlement, debt management or debt payoff planning.
Chapter 13 Bankruptcy
A Chapter 13 bankruptcy in North Carolina is known as a wage earner’s plan. In many cases, you will pay back a portion of your unsecured debts in a payment plan. You are often able to keep your assets, and there’s no qualification as long as you are under the debt limits. It’s also on your credit report for 7 years instead of 10 years. It can take 36 or 60 months. If you are in a 100% Chapter 13, your payment plan may be shorter.
Debt Settlement
Debt settlement is also known as debt relief when a company or you negotiate to lower your debt balance to less than what you originally owe. That way a portion of what you were supposed to pay back will be forgiven. For example, if you owe in debt $50,000, debt settlement is able to negotiate the amount down to $25,000. The debt settlement program is often a payment plan that could be between 12 – 60 months.
Debt Management
Debt management (also known as credit counseling) is when a company negotiates to lower the interest rate of your debt. For example, if you owe a blended interest rate of 22%, a debt management company may be able to negotiate the interest rate to 9%. Many debt management companies are non-profits and will work with credit cards, but may not work with unsecured personal loans. The debt management program is often a payment plan that could be between 36 and 60 months. Many debt management firms are also national firms, so you do not necessarily need to find one local in North Carolina.
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