Federal Chapter 7 bankruptcy protections are in place to allow those in insurmountable debt to liquidate some personal property to satisfy most debts and erase others, in order to get back on their feet and re-establish a positive financial foundation. Both federal and state property exemptions have been put in place to protect some degree of personal property for an individual or family that qualifies.
However, in North Carolina, state exemptions preclude the use of federal protections, and in fact, those state protections are generally stronger than their federal counterparts. For those couples filing jointly, their exemptions can be doubled, to increase those protections further.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- North Carolina state exemption – up to $3,500
It is important to continue to make any vehicle loan payments that are secured by that vehicle, however, since the creditor can still repossess it if a debtor defaults, even though that debt may have been erased from their credit record.
How to Keep Your Home
- Federal homestead exemption - $20,200
- North Carolina state exemption – $18,500 for real or personal property or co-op used as a primary resident
Homeowners must also continue to pay their mortgage, even though it may have been erased under the bankruptcy, if it is secured by the property. A creditor may still foreclose on the property if the homeowner falls behind or defaults on that loan.
North Carolina allows exemptions for other forms of personal property:
- Health aids, household goods, clothing, appliances, furnishings, books, animals, musical instruments, and crops – up to $5,000 total
- An additional $1,000 for each dependent – up to $4,000 total (on all property that had been purchased 90 days or more prior to filing)
- Personal injury and wrongful death awards for a person upon which the debtor depended
- College savings accounts – up to $25,000
- Burial plots – up to $18,500 in lieu of homestead
- Other property – up to $5,000 minus any amount claimed for burial plot or homestead
- Tools of the trade – including books, tools, and implements – up to $2,000
Filing Schedule C of a Bankruptcy Petition
North Carolina requires those filing a Chapter 7 bankruptcy petition to include a completed Schedule C, in order to substantiate the property exemptions they are taking and the statutes that apply, by including the following information:
- The type of property claimed
- The applicable state statutes for that property
- The property exemption value for each item
- Each item’s current assessed value (not the market value)
Always Get Legal Advice
A bankruptcy attorney can help someone struggling to regain their financial footing determine the right method of doing so. If that is by filing Chapter 7 bankruptcy, they can represent the debtor and help them through every step of this difficult process, even continuing to fend off anxious creditors and representing them before difficult bankruptcy trustees, helping to complete the process in North Carolina smoothly and to their best advantage.
