The North Carolina motor vehicle exemption and other exemptions help you keep your car, truck, van, or other vehicle if you file for Chapter 7 bankruptcy. Here you’ll find information about the North Carolina car exemption: how much it is, what types of vehicles it covers, how it works for married couples, how to find the applicable statute, and more.
(For more information about exemptions, including how they work and which ones you can use, see our Bankruptcy Exemptions area. For information specific to the motor vehicle exemption, see our Motor Vehicle Exemption in Bankruptcy area.)
North Carolina’s motor vehicle exemption plays a large role in determining whether or not the bankruptcy trustee can take your vehicle to repay your unsecured creditors. If the equity in your car is less than North Carolina’s car exemption, then the trustee cannot sell it. If the equity in your car is significantly more than the applicable exemption amount, the trustee is likely to sell your car to repay your unsecured creditors. For details, see The Motor Vehicle Exemption: Can You Keep Your Car in Chapter 7 Bankruptcy?
Keep in mind that even if your car is safe from the bankruptcy trustee, the lender may be able to repossess your car during or after bankruptcy. To learn more, see Your Car in Chapter 7 Bankruptcy and If You Are Behind on Your Car Payments, Can Chapter 7 Help?
In North Carolina, you can exempt up to $3,500 in equity in your car or other vehicle.
Some states allow bankruptcy filers to use the Federal Bankruptcy Exemptions instead of state exemptions, but North Carolina is not one of these states.
If the equity in your car is more than $3,500, you may be able to cover the extra equity by using a wildcard exemption. In North Carolina, you can apply up to $5,000 of the unused portion of your homestead exemption to any property. This is called a wildcard exemption. Also, North Carolina has another constitutional personal property exemption of $500 that can be used to protect your motor vehicle. These additional exemptions can be combined with the motor vehicle exemption to cover any extra equity above $3,500.
Example. Let’s assume you have not used any of your homestead exemption and you have a car worth $9,000 with no loans on it. You can combine North Carolina’s $3,500 motor vehicle, $5,000 wildcard, and $500 constitutional personal property exemptions to exempt the entire $9,000 value of your car. This means that you would be able to keep your car if you filed for Chapter 7 bankruptcy.
Some states allow married couples filing a joint bankruptcy petition to double the listed exemption amounts. North Carolina is one of those states. So if you are a married couple filing a joint bankruptcy, you would have a motor vehicle exemption of $7,000. Similarly, your personal property and wildcard exemptions are also doubled.
(To learn about the advantages and disadvantages of joint bankruptcy filings, see Nolo's section on Bankruptcy Options for Married Couples).
The motor vehicle exemption applies to your car, truck, van, or other vehicle but it can only be used to exempt one motor vehicle. However, you can use your wildcard and personal property exemptions towards any additional vehicles.
North Carolina’s motor vehicle and wildcard exemptions cannot be used to exempt recently purchased (within 90 days of filing bankruptcy) personal property. So to be able to use the motor vehicle and wildcard exemptions to protect your car, you must have purchased the car more than 90 days prior to the bankruptcy.
You can find North Carolina’s motor vehicle exemption at North Carolina General Statutes § 1C-1601 (a)(3).
You can find the North Carolina statutes on the website of the North Carolina General Assembly at www.ncleg.net/EnactedLegislation/Statutes/HTML/BySection/Chapter_1C/GS_1C-1601.html. To learn how to find state statutes, see Nolo’s Laws and Legal Research area.
The exemption laws in North Carolina change periodically. Be sure to check the latest exemption amounts before filing bankruptcy.