08 Jul What Property Can I Keep in Bankruptcy?
In a chapter 7 bankruptcy case, you can keep all property which the law says is “exempt” from the claims of creditors. For most people who file, the exemptions protect most, if not all, of their property.
When you try to figure out whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. That means you count your exemptions against the full value minus any money that you owe on mortgages or liens. There are several exemptions available under North Carolina law, but the four most common are the homestead exemption (that protects your house), the wildcard exemption, the motor vehicle exemption, and the household goods exemption.
Under North Carolina law, a debtor who owns a home can exempt up to $35,000 of a property that is his or her principal residence. A husband and wife who jointly own the property can generally each claim $35,000, for $70,000 total. Keep in mind that all that matters when calculating the exemption is the equity available. For example, if a husband and wife own a $200,000 home that has a $150,000 mortgage against it, there is $50,000 of equity available. Because the exemption is $70,000, their home is completely protected in bankruptcy. There are also special exemptions for widows and widowers.
If there is anything left after you take the homestead exemption, up to $5,000 becomes a “wildcard” exemption that you can use to protect anything that you want to keep, including bank accounts.
Motor Vehicle Exemption
A debtor can exempt up to $3,500 of value in one car (the exemption cannot be spread across several vehicles). Again, this exemption is against the equity. A $10,000 car with $7,000 outstanding on a car loan is protected – the $3000 in remaining equity is exempt.
Household Property Exemption
The North Carolina household property exemption lets a debtor keep $5000 worth of household goods, plus an additional $1000 for each dependent, with a cap of $9000. This protects “household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments;” basically most of the things a debtor will own.
401(k)s and 529 Plans
401(k) and other retirement plans are generally completely exempt, and 529 college savings plans are exempt up to $25,000 per child.
Call us at 919-313-4636 for a free consultation to learn how your property would be handled in a bankruptcy.