Exemptions are the amounts in property that you get to keep. They can apply to both homes and land and also personal items, such as a car or jewelry. Exemptions may allow you to keep items, or receive money back in the event an item is sold.
Once your bankruptcy is filed, your property belongs to a bankruptcy “estate”. You may be living in the same house, and driving the same car, but they are owned by your bankruptcy estate for the duration of your case.
A trustee is assigned to look after your estate. It is his or her job to find property that can be sold to pay back your creditors. A trustee’s office will conduct its own asset search. You must be very honest with the trustee about what you own. You do not want to be accused of fraud, because you can risk having your case dismissed, or suffer even more severe penalties.
Generally, a trustee is only interested in items that he or she can sell. He or she will consider the value of your assets, the amount of exemptions you are claiming in them, and how much it will cost his office to make a sale, taking into account moving and storage costs, advertising, and hiring an auctioneer. The trustee will take all these items into account in determining whether or not to sell an asset. Household items, such as furniture, are priced at their fair market value – what you could get for them if you sold them yourself – not the price you paid for them.
Every state has its own set of exemptions, and some states also let you choose to use the federal exemptions. North Carolina’s exemptions include $35,000 for equity in a house, $3,500 in a car, and a $5,000 wildcard exemption, which can be used for anything. Please note that if you are married, and both spouses file for bankruptcy together, these exemptions are doubled.
To see how the exemption process works, take a car, for example. You decide you do not want to keep the car. The trustee may sell the car for $8,000, give you a check for $3,500 (your motor vehicle exemption in North Carolina), then distribute the remaining $4,500 to your creditors.
To claim a state’s exemptions, you must have been a resident of that state for at least two years prior to the time you file for bankruptcy. If you own a home in that state, you must wait even longer. If you need to file for bankruptcy, but have not lived in a state long enough, you will have to look to the laws of the state you spent the most time living in six months before the two year period began.
Don’t go into the bankruptcy process alone. Let a caring, experienced bankruptcy attorney help you. Call the Law Office of Rebecca Darchuk at (828) 505-1052, or email her at firstname.lastname@example.org for a free consultation.