Bankruptcy in North Dakota
Bankruptcy is designed to help individuals who are struggling to pay their debts with their current income. Bankruptcy in North Dakota is divided into two different consumer chapters: Chapter Seven and Chapter Thirteen. These two chapters vary by how much money an individual can pay towards his or her debts. For instance if an individual can pay only one hundred dollars per month on his or her debts, he or she will be eligible for Chapter Seven bankruptcy.
If an individual can pay up to one hundred sixty-six dollars per month on his or her debts, he or she is only eligible for Chapter Thirteen bankruptcy. All those who fall in between the one hundred and one hundred sixty-six-dollar marks will most often be eligible for Chapter Seven bankruptcy.
North Dakota Means Testing
Another signifier for which chapter an individual will be eligible depends on his or her means test. Each state is required to administer a means test before bankruptcy can be filed. This is designed to mathematically compare an individual’s average income for the past six months to the median of the state of North Dakota.
When an individual’s income average is above the state median, he or she is not eligible for Chapter Seven bankruptcy and will be assigned to Chapter Thirteen bankruptcy. When an individual’s income average is below the state median, he or she is eligible for Chapter Seven bankruptcy.
Along with the necessary means test, future petitioners are required to attend credit counseling at least six months before they are eligible to petition for bankruptcy. After bankruptcy has been completed, individuals are also required to attend a financial management instructional course so that bankruptcy will not be needed in the future.
Chapter Seven Bankruptcy
Chapter Seven bankruptcy helps individuals relieved themselves of debt by liquidating portions of their property. The North Dakota bankruptcy court will assign a trustee to each case. The trustee will then divide the non-exempt property from the exempt property and liquidate the property for its full value.
Some kinds of property are exempt from liquidation. These can include pensions, motor vehicles, homes, clothing, farming equipment, some forms of insurance, and many others. Property that is deemed unnecessary to the needs of the individual or property that exceeds the value limit will most often be liquidated.
Non-exempt property that an individual wants to keep must be purchased as if it were otherwise liquidated. All the funds acquired through liquidation are then used to pay creditors. While this process is underway, all creditor claims and foreclosure will be frozen. Chapter Seven bankruptcy can take up to six months to complete.
Chapter Thirteen Bankruptcy
Chapter Thirteen bankruptcy allows individuals to pay off their debts by using their own income. Instead of selling property through a trustee, the court will appoint a specific payment plan catered to the individual’s income and expenses. Each month a certain amount is required to be paid for a maximum of five years. Payment plans may also be placed on a three-year scale rather than a five-year scale.