Some North Carolina residents who are dealing with unmanageable debt might be worried about filing for Chapter 7 bankruptcy because of their belief that they will lose everything they own. However, people who file for bankruptcy are able to claim exemptions for certain types of property. In many cases, people are able to retain most of what they own when they file for Chapter 7 bankruptcy.
What are bankruptcy exemptions?
In a Chapter 7 bankruptcy, the trustee liquidates a debtor’s non-exempt assets to repay a portion of what is owed to the creditors. If the bankruptcy petition is approved, the remaining unsecured debt balances will be discharged. This means that the debtor will no longer be legally obligated to pay the discharged debts, and the creditors cannot engage in any further collection activities. While non-exempt assets may be seized and sold, there are exemptions that bankruptcy filers can claim to exclude certain assets from the bankruptcy estate. These assets will not be seized, meaning the debtor will continue to own them even after the bankruptcy case is closed.
What types of property are exempt?
While some states allow people to choose either the federal exemptions or the state exemptions, debtors in North Carolina must use the state’s exemptions. Some of the types of property that fall into these exemptions include the following:
• $35,000 in home equity or $60,000 in equity for people aged 65 or older
• $3,500 for one car
• $5,000 for clothing, books, appliances and furniture with $1,000 additional per dependent up to a maximum of $4,000 for dependents
• Educational savings accounts up to $25,000
• $2,000 for tools of a trade
• Personal injury or wrongful death settlements or awards
There are also other categories of exempt property in North Carolina. If you believe that filing for Chapter 7 bankruptcy might be a potential option for you, you should talk to an experienced personal bankruptcy law attorney to learn more about the property you might be able to exempt.
Bankruptcy is obviously not the first option debtors consider to relieve their burden. However, it can offer relief when all the other options are impractical. If you decide you have to choose this course, remember that some of your property will be exempt.