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Bankruptcy: North Carolina

Filing bankruptcy in North Carolina aims to achieve two things:  First, it gives debtors a chance to overcome crushing debt, and second it allows creditors to be repaid to the extent that the debtor’s property value or earnings permit. 26,227 bankruptcies were filed in North Carolina in 2010, ranking North Carolina 43rd in the country for the number of bankruptcy filings per capita. 54% of North Carolina’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in North Carolina

Federal law governs bankruptcy proceedings in North Carolina, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in:

  • North Carolina Eastern District Court: Elizabeth City, Fayetteville, New Bern, Raleigh, Wilmington, Wilson
  • North Carolina Middle District Court: Durham, Greensboro, Winston-Salem
  • North Carolina Western District Court: Ashville, Charlotte, Shelby, Statesville

While federal courts have jurisdiction over bankruptcy proceedings, North Carolina law bars petitioners from using the exemptions listed in the U.S. bankruptcy code and instead must choose from exemptions listed under North Carolina state law. A North Carolina bankruptcy attorney can help debtors understand what personal property the exemptions permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, North Carolina

Chapter 7 bankruptcies in North Carolina are the most common bankruptcy filing.  Chapter 7 is best suited to petitioners who do not have significant assets such as investments or substantial equity in a home, for the reason that a Bankruptcy Trustee may liquidate personal property that isn’t protected by North Carolina’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. North Carolina’s Chapter 7 bankruptcy law allows debtors to keep some essential property and the exempt assets are strictly off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

North Carolina Bankruptcy Exemptions

North Carolina bankruptcy law designates specific property exemptions that permit debtors to keep certain personal property and assets so they may move forward from bankruptcy as productive members of society.  In real terms, this means the creditors cannot force debtors to sell the shirt off their backs.  Bankruptcy in North Carolina permits petitioners to choose exemptions from the state list, only.

Property exemption amounts are subject to change, so it is suggested that individuals or couples considering bankruptcy seek the counsel of a North Carolina bankruptcy attorney and discuss the options open to them.  North Carolina bankruptcy exemptions include:

North Carolina Homestead Exemption

  • $35,000 total: Real or personal property, including co-op, used as residence (husband and wife may double; $60,000 total if 65 or older and spouse is deceased)
  • $5,000 of unused portion of homestead may be applied to any property

North Carolina Tenancy by Entirety Exemption

  • Property held as tenancy by the entirety may be exempt against debts owed by only one spouse

North Carolina Personal Property Exemption

  • $25,000 total: 529 College savings accounts
  • $5,500 total: Animals, musical instruments, books, clothing, appliances, household goods and furnishings, crops; may add $1,000 per dependent, up to $4,000 total additional (All property must have been purchased at least 3 months or 90 days prior to filing)
  • $3,500 total: Motor vehicle
  • Health aids
  • $18,500 total: Burial plot, in lieu of homestead
  • Personal injury and wrongful death recoveries for person you depended on

North Carolina Tools of the Trade Exemption

  • $2,000 total: Implements, books and tools of trade

North Carolina Wage Garnishment Exemption

  • Earned but unpaid wages received 60 days before filing for bankruptcy, needed for support

North Carolina Public Benefits Exemption

  • Aid to blind
  • Public adult assistance under work first program
  • Workers’ and Unemployment compensation
  • Crime victims’ compensation

North Carolina Insurance Exemption

  • Life insurance on spouse or children
  • Employee group life policy or proceeds
  • Fraternal benefit society benefits

North Carolina Pensions and Retirement Savings Exemption

  • Firefighters and rescue squad workers
  • Teachers and state employees
  • State law enforcement officers
  • County, municipal and city employees
  • Legislators
  • Retirement benefits from other states to extent exempt in that state
  • IRAs, Roth IRAs

North Carolina Miscellaneous Exemption

  • $20,000 total: Support received by a surviving spouse for 1 year
  • Alimony, support, separate maintenance, and child support reasonably necessary for support of debtor or dependents
  • Property of business partnership

North Carolina Wild Card Exemption

  • $5,000 total: Any property, less any amount claimed for homestead or burial exemption
  • $500: Any personal property

Chapter 13 Bankruptcy, North Carolina

In 2010, 46% of petitioners filed for protection under Chapter 13 bankruptcy in North Carolina.  Filing Chapter 13 bankruptcy in North Carolina begins a financial reorganization process in which a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan applying the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in North Carolina keep most – or all – of their property.

How to File Bankruptcy in North Carolina

Eligibility for property exemptions should be a primary factor in deciding whether to file for bankruptcy protection from creditors. The aim should be to protect major assets and discharge debts. Because each bankruptcy case is distinctive, a North Carolina bankruptcy attorney can advise debtors of their financial options concerning Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: North Carolina

It is the bankruptcy debtor’s duty to know their rights and obligations as petitioners.  A North Carolina bankruptcy attorney can simplify the language and procedures, particularly in terms of federal laws and exemption systems.  The counsel and support of a North Carolina bankruptcy attorney is valuable to anyone facing the complex and stressful road to personal bankruptcy.