If I file, am I going to lose my house? My car? Everything?
Every client who contacts us is worried that she will lose EVERYTHING by filing bankruptcy. This misconception is the biggest reason that people wait too long to contact a bankruptcy attorney, instead trying all sorts of alternatives that never work as well as planned. One reason to schedule a free consultation with a bankruptcy attorney is to get advice and information regarding what, if any, property might be at risk in a bankruptcy filing. At the consultation, an attorney will ask some questions about what you own (your assets) and offer you advice regarding what Chapter of Bankruptcy you should file based partially on what items can be protected and what cannot be protected. “Protections” in bankruptcy are called “exemptions,” in reference to them covering certain assets that are exempted from creditors. Most of North Carolina’s exemptions are listed in the North Carolina General Statutes, §1c-1601. The chart below provides some of the most commonly used exemptions in North Carolina:
Whether or not you can use North Carolina exemptions depends on where you live now and where you have lived for the past 1,215 days. Different states allow different exemptions and there are also federal exemptions.
In most cases, all property can be protected. However, there are times when there is not enough exemption to protect the full asset from creditors. If that is the case, a bankruptcy attorney may suggest a Chapter 13 Bankruptcy, in which unsecured creditors are paid the same amount as what cannot be protected. For example, if someone has a vehicle worth $15,000.00 and they owe $8,000.00 on the vehicle, they have $7,000.00 of equity. Using North Carolina exemptions, $3,500.00 of equity can be protected, leaving $3,500.00 of “exposed equity.” In that case, an attorney may advise a client to file a Chapter 13, in which the creditors would be paid a total of $3,500.00 over up to five years (approximately $60.00/month). While it’s not the same as discharging all debt, it is often a much better alternative than trying to pay off all of the creditors in full.