Protecting Property Without Bankruptcy

As a bankruptcy lawyer in Asheville, I spend time each day explaining the rights creditors have against consumers.  While many federal debts (student loans and IRS, primarily) can cause a wage garnishment, most simple unsecured creditors (credit card, personal loan, and medical) cannot garnish wages in North Carolina.  What they can do is file a lawsuit against you.

NC Exemptions Protect Property (Photo: Skippyhaha/Flicker)

If a creditor wins a lawsuit, they are allowed by law to collect the money awarded in the judgment.   One way to do this is to ask the sheriff to execute the collection by seizing property or levying a bank account.  However, the first step in the process of execution is for the creditor to serve notice of a consumer’s right to have exemptions designated.

By designating exemptions with the provided form (linked above) within 20 days of receipt, a consumer can declare which property is off-limits to the judgment creditor.  The theory is that these basic necessities are imperative for a person to be able to provide for their family, and work to repay their debts.

Here is a list of some property which can be protected, or exempted, for North Carolina residents even after a creditor has obtained a money judgment against them:

$35,000 per spouse in equity in a residence ($70,000 for married couple)

$5,000 per spouse in household goods ($10,000 for married couple)

$3,500 per spouse in a vehicle ($7,000 for two vehicles for married couple)

Federal law protects money that comes from Social Security, SSI, and Veterans’ Benefits.

When only one spouse is a judgment debtor, but both are owners of the residence, the residence may be entirely exempt. 

When the judgment debtor co-owns property with someone else, the judgment creditor may only execute on the non-exempt equity in the property.

There are more exemptions which may apply to your situation.  This list is not exhaustive.  The proper value to indicate on the exemption designation form is the liquidation value of the property.  Liquidation value is the amount you would receive if you tried to sell the property yourself, with the cost of sale being deducted from the value.  A TV, for instance, with a retail value of $500 would likely only have a $100 liquidation value (or less).

Declaring exemptions can be a powerful tool, and helps many consumers avoid filing a bankruptcy case.  However, a lawsuit, or even the potential for a lawsuit, is a sign that you should seek professional advice about your financial situation in order to become informed.  For those of you in Western North Carolina, I would be pleased to speak with you during a free, initial bankruptcy consultation.

*The information contained on this website is not intended and does not constitute the providing of any legal advice or any legal opinions or services to any user thereof. The information available on or through this web page is not intended and shall not be used as a substitute for the advice and consultation provided by an attorney.  Any factual examples used to illustrate concepts are hypothetical and do not depict actual events or real persons.