Property that you can keep and protect from your creditors when you file Chapter 7 bankruptcy is called “exempt” property. The basic purpose of bankruptcy is to allow a person who is overwhelmed with debt to free himself of that burden. The law allows you to keep property to help you achieve a fresh start. The exemptions are broken down into categories. Here is a list of exempt property for debtors who have been domiciled in North Carolina for over 2 years.
You may exempt up to $35,000 total equity in your residence, including a mobile home and burial plots. If you and your husband or wife own the property jointly and file a joint petition, you can claim $70,000 as exempt. In certain circumstances you may be able to exempt the entire value in a residence if you own it jointly with your spouse and have no joint creditors.
2. Motor Vehicle
You can claim up to $3,500 in equity in one motor vehicle.
3. Household Goods
You can claim exemptions of up to $5,000 for yourself, plus $1,000 for each dependent (not to exceed 4), in items such as household furniture, clothes, jewelry, etc. You value these items at a price at which you can sell them, not at their original cost or replacement value.
4. Tools of Trade
You can exempt $2,000 of equity in “tools of the trade.”
5. Wild Card
A wildcard exemption is available to exempt any property for $5,000.
6. Life Insurance
Life insurance policies insuring the life of the debtor in which his or her spouse and/or children are named beneficiaries are exempt.
7. Health Aids
You can claim an unlimited amount of professionally prescribed health aids for the debtor or a dependent of the debtor (e.g., wheel chair, hearing aid and the like).
8. Compensation for Injuries
Compensation for personal injuries and workman’s compensation is exempt.
9. College Savings Accounts
Funds in a college savings plan qualified under §529 of the Internal Revenue Code, not exceeding $25,000, and only to the extent the funds are for a child of the debtor and will actually be used for the child’s college expenses, are exempt.
10. Retirement Benefits
There are no dollar limits here on qualified IRA accounts. Talk to a bankruptcy attorney before using IRA funds to pay bills!
11. Government Benefits
Veterans Administration, Social Security and AFDC benefits are exempt.
12. Tenants By The Entirety
Any real estate owned by a husband and wife jointly is exempt from any creditor who has a claim against just the husband or wife. It is not exempt from a creditor who has a joint claim against both the husband and wife. If you own real estate jointly with your spouse with a large amount of equity, it may be crucial to know what joint debts you have with your spouse.
Your earnings for personal services rendered within 60 days of filing the bankruptcy which are necessary for the support of you and your family remain exempt even if they have been deposited in a bank account.
There are other exemptions which apply to certain specific situations.
If you have any questions about the North Carolina exemptions, do not hesitate to give me a call.