The Short Answer
In most North Carolina bankruptcy cases, you get to keep all of your property. Federal and state law gives you specific exemptions — protected amounts for your home, car, retirement accounts, and personal belongings — and we structure your filing around those exemptions. Whether you file Chapter 7 or Chapter 13 determines how those protections are applied, but the goal in either case is to keep what matters to you while eliminating or restructuring your debt.
One of the biggest fears people have in filing bankruptcy is being able to protect their property. Here is the good news – we can almost always protect all of your property. You are entitled to keep a generous amount of your belongings when filing bankruptcy. North Carolina law now provides higher personal exemptions–items that are protected from seizure by your creditors.
North Carolina law allows each spouse or individual to keep equity in a homestead. Currently, in North Carolina, a person can protect $35,000 of equity in a homestead. A married couple can protect $70,000. A homestead is your personal residence that you are living in at the time of the bankruptcy filing. Equity is determined by subtracting the amount that you owe on your mortgage (and second mortgage) from the fair market value of your home. A good way to determine the fair market value of your home is looking at the county tax value. Your house may be worth more or less than this number but, again, it’s a good starting point.
You should not have a problem keeping your home in a Chapter 7 bankruptcy, as long as you are current on your house payments at the time of filing the bankruptcy. Of course, if you fall behind on your mortgage payment after filing your bankruptcy they can try to foreclose on your house as they could at any other time. Another important consideration when filing a Chapter 7 bankruptcy is meeting the exemption qualifications that we discussed above. If the equity (difference between what your house is worth and what is owed) in your home exceeds the allowed exemption amount ($35,000 for one person and $70,000 for a married couple) or if you are behind in your mortgage payments and unable to get caught up, a Chapter 13 bankruptcy may allow you to save your home and be a better option.
Filing a Chapter 13 bankruptcy will protect your home as long as you can make the monthly payments required in a Chapter 13 bankruptcy. To get a good idea of what those payments are you will need to set up a consultation with a bankruptcy attorney.
The short answer is yes, usually. In North Carolina, you are allowed to use up to $3,500 in a motor vehicle with the motor vehicle exemption. However, you will likely be able to protect more than that amount by using at least a portion of your wildcard exemption. The key component that will be evaluated when looking at protecting your vehicle is the amount of equity in your vehicle. Like determining the equity on a house, you can determine the equity in your vehicle by subtracting the amount you owe from the retail value of your automobile. In other words, if you owe $6,000 on a vehicle and NADA says that it is worth $10,000 then you have $4,000 in equity. In that example, we would use your $3,500 motor vehicle exemption and, likely, $500 of your wildcard exemption to protect the vehicle and all of the equity in the vehicle.
Another important point is that you must remain current on your vehicle payments if you want to keep the vehicle. If you fall behind then it could be repossessed by the financing company.
Most retirement savings plans are protected by the Employee Retirement Income Security Act (ERISA), and are, therefore, fully protected in bankruptcy. To find out if your retirement account is ERISA qualified you should check the plan summary, which you should receive once a year from the plan administrator. You can also contact your plan administrator and ask them to send you something in writing stating that your retirement account is ERISA qualified. In addition to retirement accounts, 529 college savings plans are also protected under than bankruptcy.
Bank accounts, cash, household goods and furnishings, jewelry, clothing, insurance policies, etc. are all classified as personal property. There are a number of exemptions to protect all of these items for you when filing bankruptcy. Unless you have a unique situation, your personal property should be protected.
Contracts and/or leases that you are currently in, such as an apartment lease, cell phones contracts, gym membership, storage units, furniture rental, etc. can all be retained as long as you are current with your payments.
Furniture that you are making payments on would be considered a secured debt. As long as you are current on secured debts you will be able to keep them when filing a Chapter 7 bankruptcy. If you are behind you have the option of surrendering that property, getting current before you file a Chapter 7 bankruptcy or filing a Chapter 13 bankruptcy.
Key Takeaways
- North Carolina protects up to $35,000 in home equity per individual ($70,000 for a married couple) — if your equity stays within that limit and you're current on payments, you can keep your home in Chapter 7.
- The motor vehicle exemption covers $3,500 in vehicle equity, but you can stack the $5,000 wildcard exemption on top to protect more — most people keep their car without any problem.
- Retirement accounts covered by ERISA — including 401(k)s, IRAs, and pensions — are almost always fully protected in bankruptcy, regardless of how much is in them.
- To keep a secured asset like a house or car, you must stay current on payments — exemptions protect equity, not the lender's right to foreclose or repossess if you fall behind.
- If your home equity exceeds the exemption limit or you're behind on mortgage payments, Chapter 13 may be the better path because it lets you catch up over a 3–5 year repayment plan.
- Personal property — cash, bank accounts, household goods, clothing, and jewelry — is covered by a combination of exemptions, and most people with ordinary belongings protect everything they own.
Attorney Insight
The mistake I see most often is people coming in convinced they'll lose everything — their house, their car, their grandmother's furniture — when in reality, nearly every client I've worked with over the past 28 years has walked away keeping all of it. What trips people up isn't the exemptions themselves, it's not understanding how equity is calculated: if you owe $180,000 on a home worth $210,000, your equity is $30,000 — well within the $35,000 individual limit — and the trustee has no interest in that property. Where I do see real risk is when someone has paid down a home significantly or owns real estate free and clear; in those cases, the numbers matter a lot, and filing without an attorney who knows NC exemptions is genuinely dangerous.
