The stack of bills won’t stop growing. Collection calls interrupt family dinners. And that knot in your stomach tightens each time you check your bank balance. If this sounds familiar, you’re not alone. Thousands of North Carolinians face similar financial challenges every day, and many wonder if Chapter 7 bankruptcy might offer a fresh start.
But here’s the catch – not everyone qualifies for Chapter 7 bankruptcy. North Carolina law sets specific income limits that determine eligibility. These limits aren’t designed to keep you from filing; rather, they help ensure that those who truly need debt relief can access it while directing those with sufficient income toward repayment plans.
This article breaks down everything you need to know about Chapter 7 income limits in North Carolina, helping you determine if this debt relief option might be available to you.
How North Carolina Determines Who Can File Chapter 7
The bankruptcy system uses what’s called a “means test” to determine whether your income is low enough to qualify for Chapter 7 bankruptcy. This test was introduced as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to prevent people with sufficient income from wiping out debts they could afford to repay.
In North Carolina, the means test functions as a gateway to Chapter 7 bankruptcy. It looks at your income and expenses to determine if you have enough disposable income to repay at least some of your debts through a Chapter 13 repayment plan.
The test has two parts:
- A straightforward comparison of your income to the North Carolina median income
- A more detailed calculation of your disposable income after allowed expenses
Let’s break down each part.
Part 1: How Does Your Income Compare to North Carolina’s Median?
The first step in the means test is comparing your current monthly income (CMI) to the median income in North Carolina for a household of your size.
What Counts as Income?
Your current monthly income includes most forms of income received in the six months before filing bankruptcy, such as:
- Wages and salary
- Business income
- Rental income
- Interest and dividends
- Retirement income
- Unemployment compensation
- Workers’ compensation
- State disability insurance
- Child or spousal support
Social Security benefits, including retirement, disability (SSDI), and Supplemental Security Income (SSI), are excluded from this calculation according to 11 U.S.C. § 101(10A).
To calculate your CMI, add up all income from these sources for the past six months, then divide by six to get your monthly average.
North Carolina Median Income Figures
As of April 2025, here are the median income figures for North Carolina households:
- Single-person household: $55,786
- Two-person household: $71,023
- Three-person household: $82,145
- Four-person household: $98,672
- Add $9,000 for each additional household member beyond four
Note: These figures are adjusted periodically. For the most current figures, check the U.S. Trustee Program’s website at www.justice.gov/ust.
What Happens After Comparing Your Income?
If your calculated CMI is below the North Carolina median income for your household size, congratulations! You pass the means test and can file for Chapter 7 bankruptcy, assuming you meet other requirements.
If your income exceeds the state median, don’t panic. You might still qualify for Chapter 7 after completing the second part of the means test.
Part 2: Calculating Your Disposable Income
If your income is above North Carolina’s median, the means test requires a more detailed analysis of your finances. This second part calculates your disposable income by subtracting allowable expenses from your CMI.
Allowed Expenses Under North Carolina Guidelines
The bankruptcy code allows you to deduct certain expenses from your income, including:
- Living Expenses: Based on IRS National Standards and include food, clothing, household supplies, personal care, and miscellaneous expenses.
- Housing and Utilities: Based on IRS Local Standards specific to North Carolina counties. For example, housing allowances are higher in Wake or Mecklenburg Counties than in more rural counties.
- Transportation Costs: Includes car payments, insurance, gas, maintenance, and public transportation costs, based on IRS Local Standards for North Carolina.
- Taxes: Including income taxes, FICA, Medicare, and state and local taxes.
- Healthcare Costs: Including insurance premiums and out-of-pocket medical expenses.
- Child or Dependent Care Expenses: Including childcare and school expenses.
- Secured Debt Payments: Such as mortgage and car payments.
- Priority Debts: Such as child support, alimony, and certain tax obligations.
The Disposable Income Calculation
After subtracting all allowed expenses from your CMI, you’ll arrive at your monthly disposable income. According to 11 U.S.C. § 707(b)(2), here’s how this figure affects your eligibility:
- Less than $136.25 per month: You pass the means test and can file Chapter 7.
- Between $136.25 and $227.50 per month: Your disposable income is multiplied by 60 (representing a 5-year Chapter 13 plan). If this amount would pay less than 25% of your unsecured non-priority debts, you can file Chapter 7. Otherwise, you fail the means test.
- More than $227.50 per month: You fail the means test and generally cannot file Chapter 7.
This calculation becomes quite complex and often requires professional assistance to complete accurately.
Exceptions to the Means Test in North Carolina
Not everyone has to pass the means test to file Chapter 7 in North Carolina. Key exceptions include:
Non-Consumer Debts
If your debts are primarily business debts rather than consumer debts, you’re exempt from the means test. This exception is found in 11 U.S.C. § 707(b)(1), which specifies that the means test only applies in cases where the debts are “primarily consumer debts.”
For North Carolina business owners with personal guarantees on business loans, this can be an important distinction.
Military Service Members
Under the National Guard and Reservists Debt Relief Act, if you’re an active-duty military member or a reservist called to active duty after September 11, 2001, you may be exempt from the means test if you served at least 90 days.
This exception, recently extended through 2027, recognizes the financial challenges facing those who serve our country.
Disabled Veterans
If you’re a disabled veteran whose debts were incurred primarily during active duty or performing homeland defense activities, you’re exempt from the means test regardless of your income level, as provided in 11 U.S.C. § 707(b)(2)(D).
What If Your Income Is Too High for Chapter 7 in North Carolina?
If you don’t pass the means test, you still have options:
Consider Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to reorganize your debts and pay them back over three to five years based on your disposable income. While it doesn’t immediately discharge debts like Chapter 7, it provides structured relief and can help you keep assets like your home.
Timing Your Bankruptcy Filing
Your CMI is based on the six months before filing. If your income has recently decreased or will decrease soon, waiting to file might help you pass the means test later.
Many North Carolinians find that seasonal income fluctuations or recent job changes can significantly impact their means test results.
Arguing Special Circumstances
North Carolina bankruptcy courts may allow Chapter 7 filing despite failing the means test if you can show “special circumstances” that justify additional expenses or income adjustments.
These might include:
- Serious medical conditions causing ongoing expenses
- Active military call-up or deployment
- Recent job loss with no comparable employment available
- Unusually high rent or mortgage payments necessary for your family’s safety
Any claimed special circumstance must be documented and verified with the court under 11 U.S.C. § 707(b)(2)(B).
The North Carolina-Specific Context
North Carolina has some unique aspects that affect Chapter 7 filings:
- County-Specific Expense Allowances: Housing, utilities, and transportation allowances vary significantly between urban counties like Wake and Mecklenburg versus rural counties.
- State-Specific Exemptions: North Carolina has its own set of bankruptcy exemptions (N.C. Gen. Stat. § 1C-1601) that protect certain assets during bankruptcy. While these don’t directly affect the means test, they impact the overall bankruptcy strategy.
- Local Court Practices: Bankruptcy judges in the Eastern, Middle, and Western Districts of North Carolina may interpret borderline means test cases differently.
Key Takeaways About Chapter 7 Income Limits in North Carolina
- The means test determines Chapter 7 eligibility based on your income relative to North Carolina median income figures.
- If your household income falls below the state median, you automatically qualify for Chapter 7.
- Even with higher income, you may still qualify if your disposable income after allowed expenses is sufficiently low.
- Certain groups, including disabled veterans and those with primarily business debts, are exempt from the means test.
- If you don’t qualify for Chapter 7, Chapter 13 bankruptcy provides an alternative path to debt relief.
- Timing your filing and properly calculating allowed expenses can significantly impact your eligibility.
Frequently Asked Questions About North Carolina Chapter 7 Income Limits
Do I make too much money to file Chapter 7 in North Carolina?
It depends on both your income compared to state medians and your disposable income after expenses. Even with high income, you might qualify if you have high allowable expenses that reduce your disposable income below the thresholds.
What happens if my income changes after I file for bankruptcy?
The means test looks at your average income for the six months before filing. Changes after filing generally don’t affect your eligibility, although significant increases might trigger a “substantial abuse” inquiry in rare cases.
Can my spouse’s income affect my bankruptcy filing in North Carolina?
Yes. If you file jointly, both incomes are considered. If you file individually but are married, your spouse’s income must still be included in household income calculations, with adjustments for expenses not contributing to household expenses.
How often do North Carolina median income figures change?
The U.S. Trustee Program typically updates median income figures quarterly. The most recent adjustments occurred in April 2025.
If I failed the means test, can I try again later?
Yes. The means test calculations are based on your income during the six months before filing. If your income decreases or your household size increases, you might pass the test in the future.
Can retirement account contributions help me pass the means test?
Required contributions to qualified retirement plans are allowable expenses that can reduce your disposable income. However, voluntary contributions are scrutinized carefully by North Carolina bankruptcy trustees.
How do seasonal or irregular income sources affect the means test in North Carolina?
The six-month averaging approach can be challenging for seasonal workers, commission-based employees, or those with irregular income. In some cases, this timing can work to your advantage if you file after lower-income months.
Does North Carolina allow any additional local expense deductions?
While the means test follows federal guidelines, North Carolina’s varied cost of living between regions is reflected in the IRS Local Standards used for housing and transportation allowances.
Getting Help With Your North Carolina Bankruptcy
Determining whether you qualify for Chapter 7 bankruptcy in North Carolina can be complex. While this blog provides an overview of income limits, each situation is unique.
At the Law Office of Jack G. Lezman, PLLC, we’ve helped countless North Carolina residents determine their bankruptcy options. We can analyze your specific financial situation, calculate your means test results, and help you choose the best path forward.
Don’t let confusion about income limits keep you from seeking the debt relief you need. Contact us today for a free consultation about your bankruptcy options. We’re committed to helping North Carolinians find financial fresh starts through proper bankruptcy planning and filing.
