What Happens to my Property during a Chapter 7 Bankruptcy Case?
Most Chapter 7 Bankruptcy’s that are filed are “no asset” cases. What that means is that the Debtor keeps all of the property that they own and no assets are liquidated by the bankruptcy trustee. Before filing your case, a Pierce Law Group attorney will review your property values and work together with you to advise you regarding how to maximize what you are allowed to keep or “exempt,” from the proceeding.
Some of the most commonly used exemptions in North Carolina include: (1) The Homestead Exemption; (2) Motor Vehicle Exemption; (3) Personal Property Exemption; (4) Personal Injury Claims; (5) Qualified College Savings Exemption; (6) Professional Tools Exemption; (7) Retirement/Pension Exemption; (8) IRA exemptions; (9) Life Insurance Exemption; and (10) the Wildcard Exemption. The exemptions illustrated below are for an individual debtor. If you are filing bankruptcy with a spouse, the exemption amounts are essentially are doubled.
The homestead exemption protects up to $35,000.00 equity of any real property that is used as the Debtor’s primary residence. The exemption can rise up to $60,000.00, if the Debtor is 65 or older, the property is held as tenants by the entirety or joint tenants with right of survivorship, and the Debtor’s spouse has died.
North Carolina Law provides that you can exempt up to $3,500.00 in one motor vehicle.
The personal property which may be exempted up to a total of $5,000.00 for clothing, household goods, furnishings, appliances, books, and similar items, plus an additional $1,000.00 per dependent up to $4,000.00 total.
Personal Injury Claims
Personal injury claims are exempt from claims of creditors in bankruptcy proceedings but certain claims connected to the accident itself are not exempt, including certain medical bills.
Qualified college savings
North Carolina law allows qualified college savings accounts up to $25,000 an exemption. However, there is an exception for some amounts contributed within the last 12 months.
Tools, professional books, and implements involved in a trade
Up to $2,000 in tools, professional books, and implements involved in a trade are exempt. However, this exemption does not apply if the property was purchased within 90 days of filing bankruptcy.
Retirement and Pension
North Carolina provides an exemption for most retirement plans and pension, and all tax exempt retirement accounts are fully protected under federal law including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans.
In North Carolina IRAs and Roth IRAs have an unlimited exemption, and the protection extends as well to inherited IRAs (inherited IRAs are not protected in most other states).
North Carolina provides a full exemption for life insurance in the debtor’s name where the benefits would be paid for the benefit of the debtor’s children or spouse.
In the event that the full $35,000 homestead exemption is not necessary for use, you can use any unused portion of the homestead or burial exemption, up to $5,000, to exempt any other property. This is generally referred to as a wildcard exemption, as you may choose which property to exempt, however, this exemption does not apply if the debtor purchased the property within 90 days of filing bankruptcy.