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When you file for bankruptcy, you are telling the court and your creditors that you are unable to continue making payments on your debts. The Chapter 7 bankruptcy process allows you to file for bankruptcy, stop paying your regular creditors, and be legally excused from paying debts by a bankruptcy judgment/order called the Discharge Order (a fresh start). To facilitate your "fresh start" the Bankruptcy Code and state laws allow you to keep certain assets. These assets are considered "exempt" from the legal process. This means that even though these assets have value and they could be sold and the proceeds used to pay your creditors, the law says that you get to keep these assets through and after the bankruptcy. They will be protected from creditor claims and the bankruptcy process.
Below, we have developed several infographics to help illustrate how these exemptions are commonly used to protect your property.
Please note that these are just examples and each individual case can be different. It is important to discuss your specific situation with a qualified bankruptcy attorney.
North Carolina, like many other states, has provided its own property protection (exemptions) law that its residents must utilize in the bankruptcy proceeding. If you are planning to file for bankruptcy in North Carolina and you have lived here for the past two years, then you will look to the North Carolina exemptions to determine what property you are able to protect. These exemptions are found in N.C. Gen. Stat. § 1C-1601(a).
Under North Carolina law, each person is able to protect up to $3,500 in a motor vehicle. If you are a married couple, filing jointly, then you are each able to protect $3,500. This means that if you are co-owners of a vehicle, you can protect up to $7,000 in that one vehicle.
North Carolina allows you to exempt up to $35,000 of equity per person in your homestead. If you and your spouse file together, then you are able to protect up to $70,000 of equity. Additionally, if you are 65 years or older, are unmarried, and you previously owned a house with someone else (in North Carolina you most likely hold the property as joint tenants with the right of survivorship or tenants by the entirety), you are able to protect up to $60,000 of equity.
While most people use this exemption to protect equity that they may have in their house, it can also be used to protect burial plots, and most mobile homes.
In North Carolina, there is up to $5,000 to use to protect any type of asset. This is commonly called the "wildcard" exemption. The total value of your wildcard exemption depends on how much equity you exempt in your residence.
You will have the full $5,000 wildcard exemption in three circumstances:
If you have more than $35,000 equity ($70,000 for married couples) in your house and you use the full amount, then you do not have any leftover for the wildcard exemption.
If you have between $30,000 and $35,000 equity in your house ($60,000 to $70,000 for married couples) then your available wildcard exemption will be between $5,000 and $1.
The infographic below shows just one way you may be able to use this $5,000 "wildcard" exemption. If you have significant equity in your vehicle, you may use the wildcard exemption to protect up to $5,000 more in your automobile.
The wildcard exemption can also be used to protect an anticipated federal tax refund, cash held in bank accounts, valuable collections, and other types of assets.
There is also an exemption available to protect your household goods. This includes furniture, appliances, electronic items, clothes, kitchenware, linens, and other common household items. Each person is able to protect up to $5,000 of household goods. If you have any dependents that live in your house, you are able to an additional $1,000 extra for each dependent (with a maximum of 4 dependents).
There are also exemptions available for the following: