North Carolina Bankruptcy Discharge

• A bankruptcy discharge in North Carolina comes at the end of your case, when the court determines that based on the facts presented in your petition you are entitled to be free from your debts. As sweeping as a bankruptcy discharge can be, this declaration by the court does not necessarily liberate you from all of your debts. A North Carolina bankruptcy discharge applies specifically to "dischargeable" debts, and purposely excludes "non-dischargeable" debts.
  
  

Typical Non-Dischargeable Debts

• The U.S. Bankruptcy Court defines what types of debts are not dischargeable in a bankruptcy proceeding, and these rules apply to North Carolina bankruptcies as well. For a Chapter 7 case, the court considers 19 categories of debt to be non-dischargeable. Among the most common are tax debts, domestic support payments such as alimony or child support, and debts for government-funded or guaranteed educational loans, such as student loans. Chapter 13 allows you to discharge more types of debt than Chapter 7, including debts from your willful injury of property, loans used to pay taxes, and debts on property settlements created by cases of divorce.
  
  

North Carolina Dischargeable Debts

• If your outstanding debt does not fall into one of the non-dischargeable categories, you can usually walk away from it after your bankruptcy discharge. Whether you are in North Carolina or another state, dischargeable debt almost always includes credit card debt, medical bills, general loan obligations, and even home mortgage and car loans. The caveat with car and home loans is that your lender may still repossess or foreclose on your property if you file Chapter 7 bankruptcy and can't make your payments. Your North Carolina bankruptcy discharge only dismisses your obligation to pay, not your lender's interest in your collateral property. For a Chapter 13 case, you can usually work your car or mortgage payments into your mandatory creditor repayment plan.
  
  

What You May Lose

• Even if you can successfully file bankruptcy on every debt you have, you may end up losing something in exchange during the process. For a Chapter 7 bankruptcy in North Carolina, the court has the legal right to take all of your property that does not qualify as "exempt property" under North Carolina exemption law. For example, if the North Carolina vehicle exemption is $3,500, you cannot keep a car worth $20,000. In a situation like this, your bankruptcy trustee will sell your car, provide you with the exempted $3,500 and distribute the rest amongst your creditors. Things can be even worse in a Chapter 13 bankruptcy, where the court requires you to pay all of your disposable income to your creditors for as long as five years.