Legal Question in Bankruptcy in North Carolina

The exemption schedules are the same for Chapter 7 and Chapter 13. The exemption schedule you use is dependent upon your residency and what law applies. For example, if you were a resident of NC for 26 months prior to filing, you use NC Exemptions. If you moved from another state during that time you may have to use that state's exemption schedules or perhaps the Federal Exemptions. Currently, NC allows each individual to exempt up to $35,000 equity in their home, unless you are over 65, and unmarried holding property formerly held in entireties or jointly with a deceased spouse. In that case the exemption goes to $60,000. If you do not use all the real estate exemption, you can use up to $5,000 of it in any property. Each debtor also may exempt $5,000 in household goods, $1,000 for household goods for each dependent, $3,500 equity in an automobile, $2,000 in tools of the trade as well as other exemptions such as life insurance, health aids, retirement funds, college savings plans and etc. They are found in NCGS 1C-1601, because NC opted out of the Federal Scheme. If you have to use the Federal Exemptions, they are found in 11 USC Section 522(d). Planning is necessary to take advantage of the exemptions. One should contact a bankruptcy lawyer very early in the bankruptcy thinking process to maximize use of the exemptions.

This is a followup to the last answer. In a Chapter 13, one of the tests for confirmation is "did the creditors receive in the Chapter 13 Plan, at least as much as they would have received in a liquidation (Chapter 7). As a result, the amount paid into the plan effectively enlarges the amount you can keep. For example, some debtors elect to file a Chapter 13, not because they fail the means test but because they have too much equity in their home and want to keep it. Say, the equity is 90,000. Husband and wife can exempt only $70,000. The options are two: Pay the Chapter 7 trustee $20,000 in cash and secure an immediate discharge, keeping the home or pay $20,000 in payments over 3 years to the trustee in a Chapter 13. Typically, a debtor cannot get that much cash or they would not be in bankruptcy. Thus, by stacking the exemptions with plan payments, the amount you keep is increased.