What Property Is Exempt?

Exempt property is simply property that you can keep and protect from your creditors when you file Chapter 7 bankruptcy. The basic purpose of bankruptcy is to allow a person who has become overburdened with debt to free himself of that burden and get a "fresh start." The law allows you to keep property to facilitate this fresh start. The exemptions are broken down into categories. The property you can exempt is determined under North Carolina law if you have been domiciled here for at least two years. If not, the exemptions are determined under either the exemption available under the law of the state in which you were domiciled for the six months prior to the two-year period or under the exemptions provided in §522(d)(1) of the Bankruptcy Code. In most cases, your exemptions will be those provided under the provisions of the Bankruptcy Code. For debtors who have been domiciled in North Carolina for 2+ years the exemptions PER PERSON are as follows:

1. Residence

You may exempt up to $18,500.00 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 $37,000.00 as exempt. Furthermore, an unmarried debtor who is age 65 or older is entitled to retain an aggregate interest in the property not to exceed $37,000 in value, so long as the property was previously co-owned by the debtor as a tenant by the entireties or as a joint tenant with rights of survivorship and the former co-owner of the property is deceased. "Equity" is the value of the property less all debts or liens secured by it. 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 $3,500.00 in equity in one motor vehicle.

3. Household Goods

You can claim exemptions of up to $5,000.00 for yourself, plus $1,000.00 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 $2,000.00 of equity in "tools of the trade."

5. Wild Card

A wildcard exemption is available to exempt any property. The amount of the wildcard exemption is effected by the amount, if any, you claim under the $18,500 residence exemption. The wildcard exemption is $5,000.00 and is claimed out of the unused portion of the residence exemption. For example, if the exemption you claim in a residence is less that $13,500.00 you have a $5,000.00 wildcard exemption. If you claim $16,000.00 exemption in your residence, you have a $2,500.00 wildcard exemption This exemption is usually used to claim as exempt equity in a car above $3,500.00, money in the bank, tax refunds not yet received, and
cash on hand.

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 totally 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 exceed $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. You may not exempt the funds placed in the savings plan within the year prior to filing unless they were regular contributions consistent with past pattern of contributions.

10. Retirement Benefits

There are no dollar limits here. IRA accounts. Retirement benefits of North Carolina Teachers, State Employees, Local Government Employees,and Federal Civil Service Employees are exempt. Individual retirement accounts are exempt. Retirement benefits of other states or governmental unit of other states are exempt to the extent that they are exempt under the laws of that state. Your interest in an ERISA qualified retirement plan (401-K account, pension or profit sharing plan) is also protected from your creditors.

11. Government Benefits

Veterans Administration, Social Security and AFDC benefits are exempt.

12. Wages

Your earnings for personal services rendered within 60 days of filing the bankruptcy which are necessary for the support of you and your family such earnings remain exempt even though, they have been deposited in a bank account.

13. Alimony and Child Support

Alimony, support, separate maintenance and child support payments to the extent they are reasonably necessary for the support of the debtor or a dependant of the debtor.

14. Tenants By The Entirety

Any real estate (not just a residence) 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.

15. Other

Other specific benefits and property are exempt.If your property exceeds the amount of exemptions, and you are not willing to risk losing it, your option is Chapter 13 bankruptcy.

**The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.**