North Carolina Bankruptcy Exemptions

Learn how to protect your property in a North Carolina bankruptcy using bankruptcy exemptions.

Like all states, North Carolina has a set of exemptions you can use to protect property when filing for bankruptcy, such as a home, car, and retirement account. In this article, you'll learn:

  • how long you must live in North Carolina before using its exemptions
  • whether North Carolina exemptions will protect all of your property, and
  • what will happen to any property you can't exempt.

If you have more questions, read Filing for Bankruptcy in North Carolina. Not only will you find answers, but it includes helpful checklists and a link to an interactive bankruptcy quiz. Or, try the start-to-finish bankruptcy guide, What You Need to Know to File for Bankruptcy.

How North Carolina Bankruptcy Exemptions Work

You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.

  • In Chapter 7 bankruptcy, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors.
  • In Chapter 13 bankruptcy, you keep everything you own. However, you must pay the value of the nonexempt property equity in your repayment plan, or your disposable income, whichever is more.

The different approaches ensure that creditors receive the same amount regardless of the chapter filed.

When You Can Use North Carolina Bankruptcy Exemptions

You can file for bankruptcy in North Carolina after living there for more than 180 days. However, you must live in North Carolina much longer before using North Carolina exemptions—at least 730 days before filing, to be exact. Otherwise, you'd use the previous state's exemptions.

But suppose you weren't living in any particular state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).) Learn more about filing for bankruptcy after moving to a new state.

Common North Carolina Bankruptcy Exemptions

Here are some of the North Carolina bankruptcy exemptions that bankruptcy filers often use. Spouses can double the exemption amount if they both own the property and file a joint bankruptcy case. Other exemptions you can use in addition to North Carolina's exemptions include:

Filers must use the North Carolina bankruptcy exemptions—the federal bankruptcy exemptions aren't available in this state. Unless otherwise noted, all references are to the North Carolina Revised Statutes (Mo. Rev. Stat.).

North Carolina's Homestead Exemption

The homestead exemption protects equity in your home. In North Carolina, The homestead exemption protects up to $35,000 in equity of any real or personal property used as a residence. Both spouses must be on the title to double this exemption.

This exemption rises to $60,000 if the debtor is age 65 or older, the property is held as tenants by the entirety or joint tenants with right of survivorship, and the debtor's spouse has died. (N.C. Gen. Stat. § 1C-1601(a)(1)).

Property owned as tenants by the entirety is exempt without any equity limit concerning the debts of one spouse; however, applying this exemption can be tricky--consult with a bankruptcy lawyer. (In re Chandler, 148 B.R. 13 (E.D. N.C. 1992)).

You can exempt up to $35,000 in equity of burial plots if you haven't used the homestead exemption. (N.C. Gen. Stat. § 1C-1601(a)(1)). For more information, see The North Carolina Homestead Exemption.

North Carolina's Motor Vehicle Exemption

You can exempt up to $3,500 in one motor vehicle. (N.C. Gen. Stat. § 1C-1601(a)(3)). This exemption does not apply if you purchased the vehicle within 90 days of filing bankruptcy. (N.C. Gen. Stat. § 1C-1601(d)).

Other Personal Property

You can exempt the following personal property in North Carolina:

  • A total of $5,000 for clothing, household goods, furnishings, appliances, books, and the like, plus an additional $1,000 per dependent up to $4,000 total. (N.C. Gen. Stat. § 1C-1601(a)(4)). This exemption does not apply if you purchased the property within 90 days of filing bankruptcy. (N.C. Gen. Stat. § 1C-1601(d)).
  • Personal injury and wrongful death compensation. However, certain claims connected to the accident are not exempt. (N.C. Gen. Stat. § 1C-1601(a)(8)).
  • Qualified college savings accounts up to $25,000. There is an exception for some amounts contributed within the last 12 months. (N.C. Gen. Stat. § 1C-1601(a)(10)).
  • Prescribed health aids. (N.C. Gen. Stat. § 1C-1601(a)(7)).
  • Up to $2,000 in tools, professional books, and implements involved in a trade. (N.C. Gen. Stat. §1C-1601(a)(5)). This exemption does not apply if you purchased this property within 90 days of filing bankruptcy. (N.C. Gen. Stat. § 1C-1601(d)).

Wages

North Carolina provides an exemption for wages earned but unpaid for work done 60 days before the filing date. (N.C. Gen. Stat. § 1-362)).

A portion of earned, but unpaid, wages is protected by federal law. (15 U.S.C. § 1673).

Retirement and Pensions

Most retirement plans and pensions are exempt in North Carolina, whether based on federal or state law. A list of the more common retirement arrangements follows.

  • All tax-exempt retirement accounts are fully protected under federal law, including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans. (11 U.S.C. § 522(a)(3)(C)).
  • IRAs and Roth IRAs have an unlimited exemption under state law, and the protection extends to inherited IRAs (inherited IRAs are not protected in most other states). (N.C. Gen. Stat. § 1C-1601(a)(9)).
  • Retirement benefits payable from another state government are exempt if the benefits are exempt in that state. (N.C. Gen. Stat. § 1C-1601(a)(11)).
  • Firefighters and rescue workers have unlimited protection for pension benefits. (N.C. Gen. Stat. § 58-86-90).
  • Legislators have unlimited protection for pension benefits. (N.C. Gen. Stat. § 120-4-29).
  • Municipal, city, and county employees have unlimited protection for pension benefits. (N.C. Gen. Stat. § 128-31).
  • Teachers have unlimited protection for pension benefits. (N.C. Gen. Stat. § 135-9).
  • State employees have unlimited protection for pension benefits. (N.C. Gen. Stat. § 135-95).
  • Law enforcement officers have unlimited protection for pension benefits. (N.C. Gen. Stat. § 143-166-30(g)).

Public Benefits

The following public benefits are exempt under North Carolina law:

  • Unemployment compensation. (N.C. Gen. Stat. § 96-17).
  • Workers' compensation benefits. (N.C. Gen. Stat. § 97-21).
  • Crime victims' compensation. (N.C. Gen. Stat. § 15B-17).
  • Aid to the blind and families with dependent children. (N.C. Gen. Stat. § 108A-36).
  • Future Social Security benefits. (42 U.S.C. § 407 (a)).
  • Veterans benefits. (38 U.S.C. § 5301).

Insurance

Life insurance for the benefit of the debtor's children or spouse is exempt. (N.C. Gen. Stat. § 1C-1601(a)(6)).

An employee group life insurance policy or proceeds have an unlimited exemption. (N.C. Gen. Stat. § 58-58-165).

Alimony, Child Support, and Separate Maintenance

Alimony, child support, and separate maintenance are exempt if the debtor shows that such payments are necessary for support. (N.C. Gen. Stat. § 1C-1601(a)(12)).

Wildcard

You can use any unused portion of the homestead or burial exemption, up to $5,000, to exempt any other property. This is generally referred to as a wildcard exemption. (N.C. Gen. Stat. § 1C-1601(a)(2)). This exemption does not apply if the debtor purchased the property within 90 days of filing bankruptcy. (N.C. Gen. Stat. § 1C-1601(d)).

North Carolina has an additional wildcard exemption of $500. (N.C. Const. Art. X, § 1).

Confirming North Carolina's Bankruptcy Exemptions

North Carolina's exemption amounts are adjusted periodically. You can check bankruptcy exemption amounts on www.legalconsumer.com. Or do some research on your own. To learn how, see Nolo's Legal Research Center.

Updated May 27, 2021

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