Posted On: December 8, 2017
Posted by: National Bankruptcy Forum
The past decade has been good to North Dakota. During the Great Recession, while median incomes across the country were shrinking when adjusted for inflation, household incomes in North Dakota grew by more than 15%. In 2016, “legendary North Dakota” posted the 10th highest per capita personal income (PCPI) in the United States, at $54,267. That’s a dramatic increase compared with the state’s 2006 ranking of #39 and PCPI of just $32,801.
The improving North Dakota economy is reflected in the state’s bankruptcy statistics, too. In 1998, there were 2,069 Chapter 7 bankruptcy cases filed across North Dakota. By 2008, that number had dropped to 1,188. But, even in the best of economic environments, good people encounter difficult circumstances and need help to move forward with their lives. In 2016, there were 570 Chapter 7 bankruptcy cases filed in the state.
Some of the most common reasons people find it necessary to file for Chapter 7 bankruptcy include medical debt, lost income due to illness or injury, divorce, and job loss. And, of course, the strong state economy doesn’t mean that every community is equally stable. Rolette County is the most dramatic example: while the statewide unemployment rate is just 1.7%, Rolette County’s October 2017 unemployment rate was 6.8%. Five other North Dakota counties have unemployment rates above 2.7%.
When hardship strikes, Chapter 7 can provide individuals and married couples with the opportunity to start fresh and rebuild.
What is Chapter 7 bankruptcy?
Chapter 7 bankruptcy is a process created by the U.S. legislature to help people who are overwhelmed by debt. Congress recognized that debt relief is important not just for the individual or couple who has fallen on hard times, but for society as a whole. Ending the struggle allows the debtor to rebuild and make a positive contribution to the local and national economy.
In a Chapter 7 bankruptcy case, a qualified debtor can usually discharge — or legally eliminate the obligation to pay — most unsecured debt. Unsecured debt includes things like credit card debt, payday loans, medical bills, old utility bills and signature loans. The case begins with the filing of a bankruptcy petition and additional documents called “schedules.” The bankruptcy schedules give the court information about the petitioner’s debts, assets and income.
In most Chapter 7 cases, an automatic stay is entered as soon as the petition is filed. The automatic stay prohibits most creditors from pursuing any collection action against the petitioner while the case is pending. That means:
- no collection calls;
- no threatening letters;
- no handing off a debt to a debt collector or selling it to a debt buyer;
- no lawsuits;
- no wage garnishment;
- no eviction or repossession; and
- no mortgage foreclosure action.
Virtually all collection action stops immediately — even lawsuits that are already underway and foreclosure sales that are already scheduled. Creditors who violate this court order may be punished by the court. In extreme cases, they may even have to pay compensation to the debtor.
Most Chapter 7 bankruptcy petitioners never even go before a judge. Most will attend a single “meeting of creditors,” which often takes less than 15 minutes. If there are no complications, the debtor may receive a Chapter 7 discharge in as little as 4-5 months, wiping out the obligation to pay unsecured debts.
Qualifying for Chapter 7 Bankruptcy in North Dakota
Generally, any debtor whose household income is below the North Dakota median for his or her family size is eligible for Chapter 7 bankruptcy protection. However, that doesn’t necessarily mean that a person or couple whose income is above the median is disqualified. When the debtor’s income is above the state median, a complicated calculation kicks in. Those whose allowable living expenses are high in comparison with their income will often qualify despite having incomes above the median.
Median income figures are updated every year. As of December 2017, the median income figures for North Dakota are:
- One-earner household: $50,622
- Two-person household: $72,105
- Three-person household: $78,599
- Four-person household: $95,893
For households with more than four members, begin with the four-person household median and add $8,400 for each additional member of the household.
A local bankruptcy attorney can crunch the numbers in advance of filing and provide an educated assessment of eligibility.
Can I keep my property if I file bankruptcy?
Bankruptcy exemptions protect certain types of property from creditors. Some states allow a bankruptcy petitioner to choose between the state exemptions and federal exemptions, but North Dakota does not.
The key North Dakota exemptions include the following.
North Dakota Bankruptcy ExemptionsThe top 5 exemptions under North Dakota state law.
|Type of exemption||North Dakota law|
|Homestead||$100,000, with no limits on acreage; cannot be doubled when married and co-owned|
|Personal property||$5,000 in clothing, $1,500 in tools of the trade, all crops and grain on up to 160 acres of property, food and fuel to last a year, all books|
|Vehicle||$2,950; up to $32,000 if modified for a disabled person, with modifications costing at least $1,500|
|Wages||No specific exemption in bankruptcy|
|Pension/retirement||$100,000 in value in each retirement account that's at least a year old, up to an aggregate $200,000 (cap may be removed if found in need of the support)|
North Dakota allows a bankruptcy petitioner to protect up to $100,000 in the value of the debtor’s home and surrounding land. This amount is not doubled when a couple files a joint petition, though married couples can double many other exemptions if they both own the property. §47-18-01; §28-22-02
Unlike some states’ homestead exemptions, North Dakota does not place limits on acreage, and allows for the protection of contiguous parcels of land. The exemption may also be applied to a mobile home. If a debtor does not take advantage of the homestead exemption, North Dakota law allows an alternative exemption of up to $10,000.
Motor Vehicle Exemption
Up to $2,950 in equity in a motor vehicle is protected. However, the protection increases to $32,000 if the vehicle has been modified to accommodate the owner’s disability and the modifications cost at least $1,500. §28-22-03.1
Personal Property Exemption
North Dakota personal property exemptions include up to $5,000 worth of wearing apparel, one family Bible or other religious text, all family pictures, sufficient food and fuel to last for one year, burial plots, all school books and books that are a part of the “family library,” all crops and grain raised by the debtor on up to 160 acres of the property where he or she resides, and all insurance benefits received from coverage of exempt assets. §28-22-03.1
A head-of-household debtor who does not use the crops-and-grain exemption may choose to protect up to $7,500 in additional personal property or money. For a single person who is not a head of household, this exemption is $3,750.
North Dakota does not recognize wage exemptions in bankruptcy. §28-22-18
Pension and Retirement Account Exemptions
The North Dakota retirement account exemption is a bit complicated. The bankruptcy petitioner can exempt up to $100,000 in value in each retirement account that is exempt from federal tax under Internal Revenue Code section 401, 403, 408, 408(a), 414, 457, or 501(a), up to an aggregate $200,000. The cap may be disregarded if the debtor can demonstrate that more is required for support. However, to be protected, an account or fund must have been in effect for at least one year.
Other Bankruptcy Exemptions
North Dakota law provides other specific exemptions, such as up to $1,500 worth of “tools of the trade.” As mentioned above, a few “wildcard” exemptions exist for special instances: if you’re the head of household, you can exempt $7,500 of personal property; if you don’t use the homestead exemption, you can exempt $10,000 in any property; and if you are single without dependents, you can exempt $3,500 of any personal property.
North Dakota Bankruptcy Court Locations
The United States Bankruptcy Court, District of North Dakota, has just one location, in Fargo:
Bankruptcy Clerk’s Office
Quentin N. Burdick United States Courthouse
655 First Avenue North, Suite 210
Fargo, ND 58102
If you’re overwhelmed by debt and want to learn more about whether a fresh start through Chapter 7 bankruptcy could provide the relief you need, a North Dakota bankruptcy attorney can be your most powerful resource. Why not take the first step toward rebuilding your finances right now? Contact us today for a free debt evaluation at 877-280-4299.