What Are the North Carolina Bankruptcy Exemptions? (How You Keep Your House and Car)

From the team at Huggins Law Firm, P.C., we want to talk about the #1 myth that stops good people from getting a “Fresh Start.”

That myth is: “If I file for bankruptcy, the government will take my house, my car, and all my stuff.”

This is 100% false.

It is the opposite of what the law is for.

The entire goal of bankruptcy is to give you a new beginning, not to leave you homeless and on the street.

To guarantee this, the law has a set of powerful tools called “Exemptions.”

An “exemption” is not a “loophole.” It is a law, passed by our state, that says certain property is “exempt” (or “safe”) from your creditors.

Think of it as a legal, protective shield. You get to put this “shield” around your most important assets.

Property that is “exempt” cannot be taken or sold by the Bankruptcy Trustee.

This page is your simple guide to the most common exemptions we use in North Carolina to protect our clients’ property.

Key Takeaways: How You Keep Your “Stuff”

We know you’re worried. If you only read one part, read this:

• You Will NOT Lose “Everything.” This is a myth. The vast majority of people who file a Chapter 7 case keep all of their property.
• “Exemptions” are Laws that Protect Your Property. They are not “tricks.” They are your legal right.
• Your Retirement is 100% Safe. Your 401(k) and IRAs are almost always 100% protected by federal and state law. We never have to touch them.
• Your House and Car are (Usually) Safe. The “Homestead” and “Motor Vehicle” exemptions are designed to protect the “equity” (value) you have in your property.
• The “Wildcard” is a “Secret Weapon.” North Carolina gives you a “catch-all” exemption that we can use to protect cash in a bank account or “stack” on top of your car exemption.
• This is Why You Need a Lawyer. We know how to “stack” and apply these exemptions to protect the most property for you.

What is an “Exemption,” Really? (A Simple Example)

An exemption is just a “shield” that protects a dollar amount of your property’s “equity.”

“Equity” is the part you own. It is what your property is worth, minus what you owe on it.

Let’s use a simple car example:

• You have a car that is worth $10,000.
• You have a car loan for $8,000.
• The “equity” you own is $2,000.

The North Carolina Motor Vehicle Exemption is $3,500.

• The law says you can “shield” up to $3,500 of equity in a car.
• Your equity is $2,000.
• Since your $2,000 is less than the $3,500 “shield,” your car is 100% exempt.
• The Trustee cannot touch it. You get to keep your car.

This is how it works for all your property. Our entire job as your bankruptcy lawyers is to use these “shields” to legally protect everything you own.

Can I Use the “Federal” Exemptions?

No. This is a key legal point.

The U.S. Bankruptcy Code has a “federal” set of exemptions. However, it allows each state to “opt-out” and create its own list.

North Carolina has “opted-out.”

This means if you are a resident of North Carolina, you must use the North Carolina Exemption List. (Found in N.C. General Statute § 1C-1601).This is why you must hire a local North Carolina lawyer. A lawyer from another state will not know our specific, local exemption laws.

A Simple Guide to North Carolina’s Most Important Exemptions

Here is the list of the “shields” we use every day to protect our clients’ property.

(Note: These dollar amounts can change, but this is the general list).

1. The Homestead Exemption (Your House)

• The Law: N.C. Gen. Stat. § 1C-1601(a)(1)
• The Amount: $35,000 of “equity” in your primary residence.
• The “Pro-Tip” (Doubling): If you are married and filing together, you get to double this. You can protect $70,000 of equity in your home.
• The “60-and-over” Rule: If you are 65 or older, and your spouse is deceased, this exemption increases to $60,000.
• This is what saves your home. As long as your “equity” is below this number, you will not lose your home in a Chapter 7.

2. The Motor Vehicle Exemption (Your Car)

• The Law: N.C. Gen. Stat. § 1C-1601(a)(3)
• The Amount: $3,500 of “equity” in one motor vehicle.
• What if my car has more equity? This is where the next exemption becomes our “secret weapon.”

3. The “Wildcard” Exemption (Our “Secret Weapon”)

• The Law: N.C. Gen. Stat. § 1C-1601(a)(2)
• The Amount: $5,000 “catch-all” exemption.
• How it works: This is a powerful tool. You can use this $5,000 on any property you want.
• Example (Saving a Car):
  • Your car has $7,000 of equity.
  • The “car exemption” only shields $3,500.
  • Your car is “non-exempt” by $3,500.
  • What we do: We stack your $5,000 “wildcard” on top of the car.
  • Your car is now 100% protected.
• We can also use this “wildcard” to protect cash in your bank account on the day you file.

4. Retirement Accounts (Your 401(k) / IRA)

• The Law: N.C. Gen. Stat. § 1C-1601(a)(9)
• The Amount: 100% Protected.
• This is the best news. Your 401(k)s, IRAs, and other “tax-exempt” retirement accounts are 100% safe. The Trustee cannot ever touch them. This money is yours, for your future.

5. Household Goods

• The Law: N.C. Gen. Stat. § 1C-1601(a)(4)
• The Amount: $5,000 for all your “stuff” (furniture, clothes, appliances), plus an extra $1,000 per dependent (up to $4,000).
• So, a married couple with 2 kids can protect $14,000 of their household goods.
• The “Truth”: This is based on “yard sale” value, not what you paid for it. Your 10-year-old couch is not worth $2,000. It’s worth $200. It is extremely rare for anyone to have “non-exempt” furniture.

6. Tools of the Trade

• The Law: N.C. Gen. Stat. § 1C-1601(a)(5)
• The Amount: $2,000 in tools and “implements of the trade.”
• This is critical for mechanics, carpenters, or contractors in our community. This law protects the tools you need to do your job.

What is “Non-Exempt” Property?

This is the only property a Trustee cares about.

“Non-exempt” property is any asset whose value is above the “shields” we just listed.

The most common examples:

• A boat
• A second home or vacation property
• A new, expensive car that is paid off
• $50,000 in a savings account (this would be above the “wildcard” limit)
• Expensive jewelry (that is not a wedding ring) or art

If you do have “non-exempt” property, this is when we have a serious strategy discussion.

We would not file a Chapter 7 (where you would lose that boat).

We would instead file a Chapter 13. A Chapter 13 lets you keep your “non-exempt” property, as long as you pay back what it’s worth in your 5-year plan.

This is the “chess game” of bankruptcy. And it’s why you need an experienced lawyer from our firm who sees the whole board.