Bankruptcy Lawyer Bryan W. Stone answers the question: “What are North Carolina’s exemptions?”
Bankruptcy is a good thing for most people who choose to pursue it. By the time they consider filing they are typically in a tough financial spot, with mounting debt and not enough income to go around. Though bankruptcy is an excellent opportunity for a fresh start, there are certainly costs. Beyond the actual expense of filing and the harm that filing can do to your credit, bankruptcy can also mean the loss of property. To find out more about what happens to your property when filing for bankruptcy, keep reading.
The first thing to understand is that whether you end up having assets seized depends on two things: 1) what type of bankruptcy you file and 2) the value of your belongings. First, let’s tackle Chapter 7. Those who file seeking Chapter 7 bankruptcy protection do so because they want to eliminate all of their debt (or as much as they can) rather than restructure it. While this can be good in the long run, it can come with pain. The reason is that if you file for Chapter 7 you may have certain valuable assets seized and sold to pay back creditors. The bankruptcy trustee is supposed to assure that creditors receive as much money back as possible and seizing and selling a debtor’s property is one good way of doing that.
So will your property always be seized? Not necessarily. First, some assets are exempt from seizure. These can include things like your house, your car, cash and retirement accounts. Though these items can be exempt, they aren’t necessarily completely exempt. For instance, your state may have a $100,000 housing exemption. That means if you have $100,000 or less in equity on your home you don’t have to worry about having it seized and sold. If, however, you have $200,000 in equity, chances are your house will be seized and the money collected from the sale used to repay your creditors. In North Carolina, the homestead exemption is less generous. The law says that real property used as a residence is exempted up to $35,000 in equity (which can be doubled if a husband and wife file together) or up to $60,000 if the person filing is over 65.
Cars are somewhat different, these too can be exempted up to some amount (usually quite low). After that, borrowers with equity can have the vehicles seized. What’s more common though is that buyers have debt, rather than equity. In these cases, the bankruptcy system has evolved to allow debtors to sign what are known as reaffirmation agreements. These reaffirmation agreements allow a person to agree to be responsible for debt after the bankruptcy is complete, essentially take that item of property (the car) out of the bankruptcy process. This means you’ll still owe all the money for the car and you need to be sure that if you sign a reaffirmation agreement you’re prepared to make those payments going forward.
Now let’s imagine that you chose to file for Chapter 13 protection. Under a Chapter 13, your debt is restructured as part of a payment plan spread out over three to five years. Though your debt isn’t eliminated immediately, the good news is that you won’t have to worry about having your property seized either. Under a Chapter 13, so long as you continue making your payments on time your property will be safe. Another bit of good news is that even if you start out by filing a Chapter 7, you can later change to a Chapter 13 if you want to avoid running the risk of losing certain items of property.
In the end, it is certainly possible to keep items of property if you want to do so. If there are things you want to be sure are protected, you need to discuss this with a lawyer before filing. Your lawyer can explain what risks you may face and help structure the bankruptcy in as advantageous a way as possible.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
See Our Related Video from our YouTube channel:
See Our Related Blog Posts: