Before filing for bankruptcy, you want to know whether you can keep valuable property—especially your home. If you qualify to use the North Carolina homestead exemption, you'll be able to protect some equity in your house. In this article, we explain:
For more information, read How to File for Bankruptcy in North Carolina. Not only does it explain the process, but you'll find helpful checklists and a link to an interactive bankruptcy quiz. Or, for a comprehensive bankruptcy guide, try What You Need to Know to File for Bankruptcy.
Under the North Carolina exemption system, homeowners may exempt up to $35,000 of their home or other real or personal property covered by the homestead exemption. Homeowners age 65 or older whose spouse is deceased can exempt up to $60,000 under the homestead exemption if the property was previously owned by the debtor as a tenant by the entirety or as a joint tenant with rights of survivorship. (N.C. Gen. Stat. § 1C-1601(a)(1)).
In North Carolina, the homestead exemption applies to real and personal property, including your home, condominium, co-op, or burial plot. The property must be owned by a North Carolina resident. The resident or dependents must live in the property when filing for bankruptcy to claim the homestead exemption. A burial plot must be for the benefit of the debtor or the debtor's dependents.
In North Carolina, the homestead exemption is automatic—you don't have to file a homestead declaration to claim the homestead exemption in bankruptcy. To protect your home, you also need to know the differences between Chapters 7 and 13. Consider reading Your Home in Chapter 7 and Your Home in Chapter 13.
North Carolina permits doubling of the homestead exemption for married couples filing a joint bankruptcy. A married couple filing jointly in North Carolina can protect up to $70,000 worth of equity in a home. You can learn about the advantages and disadvantages of joint bankruptcy filings in Filing Considerations for Married Couples.
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.
North Carolina permits residents to apply any unused homestead exemption amount towards any other personal property up to $5,000. (N.C. Gen. Stat. § 1C-1601(a)(2)).
Some states allow bankruptcy filers to use federal bankruptcy exemptions instead of state exemptions. North Carolina isn't one of those states. If you reside in North Carolina, you must use the state exemptions (but you can protect more with North Carolina's homestead exemption than the federal exemption).
North Carolina's homestead exemption is found in the North Carolina state statutes at N.C. Gen. Stat. § 1C-1601 and in the North Carolina Constitution, Article X. To learn how to find state statutes, check out Nolo's Laws and Legal Research area.
Updated May 26, 2021