What Are Bankruptcy Exemptions?

Filing for bankruptcy does not mean that you will lose your property. In fact, for most people, all of their assets are protected through “exemptions.” Bankruptcy exemptions are the amounts and assets that a person is allowed to hold on to when filing for bankruptcy. There are specific exemptions for your home, your vehicle and many other categories of property. There are also general or “wild card” exemptions that protect miscellaneous property. Sometimes an exemption protects the entire value of the asset. Other times, an exemption protects a portion of the value of an asset. Each state has its own list of bankruptcy exemptions in addition to a federal exemption system. The bankruptcy exemptions that you are allowed to use are based on which state you lived in for the two years prior to the bankruptcy. If you have lived in North Carolina (“NC”) for more than two years you will claim the NC exemptions in your bankruptcy. NC exemptions are fairly generous and allow 90-95% of bankrupt debtors to retain all of their assets in a chapter 7 case. Once an asset is exempt, there is no longer a risk of that property being taken from you or having it affect your bankruptcy. Exemptions provide allowances designed to permit a minimum standard of living.