Exemptions

Exemptions set forth certain amounts and types of property that you can protect during the bankruptcy process. While exemptions work differently between Chapter 7 and Chapter 13, the actual exemptions themselves are the same for each chapter. In Chapter 7, exemptions determine what property you can retain through the liquidation procedure. For Chapter 13, in which your debts are consolidated into a monthly payment, exemptions are part of the determination regarding how much you must pay for unsecured debt.

Many people have heard that there are both state and federal bankruptcy protections. Some states permit the use of either type, some limit you to only one protection and other states permit you to “mix and match” protections. However, North Carolina only permits the use of its own exemptions. That is, federal exemptions are not available in North Carolina. Despite this seeming limitation, North Carolina exemptions are generous.

To begin with, North Carolina law permits exemption doubling for married couples, so both partners in the marriage can make use of their full shares. The following are common bankruptcy exemptions:

• Homestead and burial plot exemption: For those under 65, the homestead exemption protects up to $35,000 for property used as a residence. For those over the age of 65 who hold the property as tenants by entirety or as joint tenants with survivorship, the exemption doubles to $70,000.
• Motor vehicle: North Carolina law permits one exemption of up to $3,500 for a motor vehicle. However, this exemption is not available if the car or truck was purchased within 90 days of the bankruptcy filing.
• Personal property: North Carolina has numerous exemptions for personal property. Up to $5,000 of clothing, household goods or furnishings are exempt. College savings of up to $25,000 is also exempt under personal property. Many professionals can also exempt up to $2,000 in tools, professional books, reference materials and other items involved in a trade. There are additional personal exemptions that an attorney can explain to you.
• Wages: Wages earned but not received up to 60 days before the bankruptcy filing date are exempt.
• Retirement and pensions: North Carolina law makes most retirement and pension savings exempt under bankruptcy law. All tax-exempt retirement accounts, IRAs and Roth IRAs are fully exempt under North Carolina law. Additionally, firefighters, EMTs, legislators, government employees, teachers and law enforcement officers all receive unlimited protection for their pension benefits.
• Wildcard: North Carolina provides for a wildcard exemption. This allows you to use up to $5,000 of any unused portion of the homestead or burial exemption. This exemption can be used on any other nonexempt property such as additional vehicles.