North Carolina Bankruptcy Exemptions

Learn how North Carolina's bankruptcy exemptions protect your home, car, personal property, and more.

By , Attorney · University of the Pacific McGeorge School of Law

Table of Contents

North Carolina bankruptcy exemptions protect your property in bankruptcy, and becoming familiar with bankruptcy exemptions before filing will help you determine whether your assets will be at risk.

If you have more questions, read Filing for Bankruptcy in North Carolina. You'll find answers, helpful checklists, and an interactive bankruptcy quiz link.

How Do Bankruptcy Exemptions Work?

Bankruptcy helps struggling people get back on their feet by lessening their debt burden, not stripping them of everything they own. Exemptions allow bankruptcy filers to keep things needed to maintain a home and employment.

But paying creditors is also an important consideration. Bankruptcy exemptions balance these interests by letting filers keep necessary property but not unnecessary luxury items. Creditors receive bankruptcy funds when a bankruptcy filer owns "nonexempt" property not covered by a bankruptcy exemption.

How Do I Use North Carolina Bankruptcy Exemptions to Protect Property?

You'll compare your property to North Carolina's exemption laws. In most states (not all), debtors can use exemption laws to keep property from a creditor's reach in and outside bankruptcy.

Example. Big Creditor sued Ronin and received a $5,000 money judgment. When Big Creditor attempted to "levy" or remove money from Ronin's bank account, Ronin objected in court. Because the state's exemption law allowed Ronin to protect $1,500 of funds in a bank account, Big Creditor could seize only $3,500.

Example. When Maria filed for bankruptcy, she also had $5,000 in her checking account. She listed the state's $1,500 cash exemption in her bankruptcy petition and gave the nonexempt $3,500 to the bankruptcy trustee.

Will North Carolina Bankruptcy Exemptions Protect My Property?

Yes, but you must use the North Carolina bankruptcy exemptions because the federal bankruptcy exemptions aren't available in this state. However, North Carolina filers can use the federal nonbankruptcy exemptions. You'll find both lists below.

In many cases, married filers can double the exemption amount when filing together when they both own the property. Check with a local bankruptcy lawyer for specifics.

What Are Commonly Used Bankruptcy Exemptions in North Carolina?

North Carolina bankruptcy filers can protect home equity using the North Carolina homestead exemption, equity in a car using the North Carolina motor vehicle exemption, and more.

North Carolina Homestead Exemption

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 increases to $60,000 if the debtor is age 65 or older, the property is held as tenants by the entirety or joint tenants with the 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. Consider consulting 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).) Learn more about the North Carolina homestead exemption and protecting your home in bankruptcy.

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).)

Find out about protecting cars in bankruptcy and how the motor vehicle exemption works in a Chapter 7 case.

North Carolina Wildcard Exemptions

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.)

North Carolina Retirement and Pension Benefits

Most tax-exempt pensions and retirement accounts are exempt because federal law lets filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 USC 522(b)(3)(C), (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)

You can check with your fund to find out if it qualifies for tax-exempt status. Additionally, North Carolina provides that the following pensions and retirement accounts are exempt under North Carolina law:

  • 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).)

North Carolina Wages, Alimony, Child Support, and Separate Maintenance

  • 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.)
  • 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).)

North Carolina 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.)

North Carolina Insurance Benefits

  • 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.)

Other North Carolina Personal Property Exemptions

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).)

How Do I Find North Carolina Bankruptcy Exemptions?

You'll find North Carolina's statutes online on the General Assembly website. State exemption amounts are adjusted periodically and are not being updated in this article. You should verify exemptions independently or consult a local bankruptcy lawyer. To learn how, see Nolo's Legal Research Center.

What Happens to Property I Can't Exempt in a North Carolina Bankruptcy?

One of two things will happen. You'll either lose nonexempt property or pay to keep it, depending on whether you file for Chapter 7 or Chapter 13. Here's how it works.

In Chapter 7, the bankruptcy trustee sells nonexempt property and distributes the proceeds to creditors. In Chapter 13, filers pay the value of the nonexempt property to unsecured creditors. Learn about secured and unsecured debt in bankruptcy.

The procedural differences are necessary because filers can keep all property in Chapter 13 but not in Chapter 7. Without different systems, creditors would receive less in Chapter 13 than in a Chapter 7 case.

Example. Suppose you couldn't exempt a motorcycle in Chapter 7, and the Chapter 7 trustee sold it and paid unsecured creditors $10,000 after deducting sales costs. If you filed for Chapter 13, you'd pay unsecured creditors at least $10,000 through the Chapter 13 repayment plan to keep the motorcycle.

What Are the Differences Between Chapters 7 and 13 Bankruptcy?

Chapter 7 works for people who can't afford to repay creditors. Chapter 13 filers typically earn too much to qualify for Chapter 7 and must pay into a five-year repayment plan. Before filing for bankruptcy, you'll take a "means test" to determine whether you qualify for Chapter 7 or 13.

Occasionally, people qualifying for Chapter 7 file for Chapter 13 to prevent a home foreclosure, car repossession, or wage garnishment. The Chapter 13 plan allows the filer to catch up on back payments over time, a benefit not available in Chapter 7.

How Long Does it Take to File for Bankruptcy in North Carolina?

Most Chapter 7 cases close after four months, although the Chapter 7 bankruptcy trustee sometimes needs additional time to sell property or resolve a dispute. Chapter 13 cases take three to five years to complete.

How Long Do I Have to Live in North Carolina Before I Can Use Its Bankruptcy Exemptions?

You can file for bankruptcy in North Carolina after living there for over 180 days. However, you must live in North Carolina for at least 730 days before using North Carolina exemptions. Otherwise, you'd use the previous state's exemptions.

Suppose you hadn't lived in one state the entire two years before filing. In that case, you'd use the exemptions of the state you lived in the longest during the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)

More rules exist, including requirements for multiple bankruptcy filings. Find out more about filing for bankruptcy after moving to a new state and who can and can't file for bankruptcy.

How Can I Avoid Bankruptcy Exemption Problems in North Carolina?

If you don't exempt your property carefully, you could lose it. Answers to these questions might help you steer clear of typical issues.

Do I automatically get to keep my exempt property? Generally, no. Here's the procedure you'll need to follow: Select the exemption set that best protects your property, list the exempt assets and applicable exemption laws on Schedule C: The Property You Claim as Exempt, and file it with your other required paperwork.

Will someone check my bankruptcy exemptions? The bankruptcy trustee, the court-appointed official tasked with managing your case, will review Schedule C to ensure you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.

Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption will only partially protect it. Believing that the car qualifies as art, Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.

What Will Happen If I Make an Exemption Mistake in North Carolina?

Most trustees will likely try to work out the matter informally by discussing it at the 341 meeting of creditors or by phone or email. If you can't resolve the problem, the trustee will file a motion with the bankruptcy court.

It's worth noting that it's not a good idea to finesse exemptions. Not only are you obligated to supply correct information on your bankruptcy forms, but purposefully making inaccurate statements could be fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Should I Hire a Lawyer to Help With Bankruptcy Exemptions in North Carolina?

Chapter 13 bankruptcy filers will almost always want to hire a bankruptcy lawyer. Chapter 13 is too complicated for most people to navigate successfully.

Chapter 7 filers also benefit from hiring a bankruptcy lawyer. Still, it's more feasible to represent yourself if you have a relatively simple Chapter 7 case. But you should know that Chapter 7 filers can't dismiss a Chapter 7 matter without court approval, so it's prudent to consult a bankruptcy lawyer about potential issues. The extra step could help prevent unexpected property loss.

How Much Does It Cost to File for Bankruptcy in North Carolina?

You can expect to pay $1,500 to $2,500 for the average Chapter 7 case and more for a Chapter 13 matter. Bankruptcy lawyers with more experience will charge higher fees than those practicing in large cities because of the costs associated with doing business.

Even so, most bankruptcy matters won't require a top-tier lawyer. But because of the specialized nature of bankruptcy rules, you will want someone who has filed many cases.

At the time of writing, filing fees are $338 for Chapter 7 and $313 for Chapter 13, and costs for mandatory credit counseling and debt management courses run $50 to $75.

Can I Make Payments to My Bankruptcy Lawyer?

No, not in a Chapter 7 case. Chapter 7 lawyers won't file your matter before you've paid in full because the bankruptcy court would erase any outstanding balance with other dischargeable debts. You can pay Chapter 13 attorneys' fees in installments through the Chapter 13 plan.

Need More Bankruptcy Help?

Did you know Nolo has made the law easy for over fifty years? It's true, and we want to ensure you find what you need. Below, you'll find more articles explaining bankruptcy and how it works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

Updated August 29, 2023

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