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What is an Individual Left With After a Chapter 7 Bankruptcy Filing

A bankruptcy petition under Chapter 7 allows the bankruptcy trustee to liquidate any non-exempt assets of the filing debtor in an effort to pay off the debtor’s creditors. One question that individuals seeking protection under the Bankruptcy Code is which of their assets are classified as exempt and, accordingly, protected from their creditors. Really what that question is asking is: will I be left with nothing?

The answer to that question is, of course, no. North Carolina law protects items essential to the day-to-day living of its debtors and this makes bankruptcy a viable option to consider when discussing your options with a business lawyer. Some of the more common exemptions are described below.

1. An individual can protect up to $35,000.00 in equity in their real or personal property used as a residence. Homes owned as tenancies by the entirety are exempt without any limit if only one spouse is petitioning for relief from the Bankruptcy Court.
2. $5,000.00 of any unused portion of the “homestead exemption” listed above can be applied to any property.
3. An individual can protect up to $3,500.00 in equity in a motor vehicle.
4. An individual can protect up to $5,000.00 in the value of clothing, household goods, furnishings, appliances, books, animals, musical instruments and crops, with an additional $1,000.00 per dependent (with a maximum of $4,000.00). So an individual with three dependents can protect up to $8,000.00 in qualified personal items.
5. Tax exempt retirement accounts and most pensions are generally exempt.
6. $2,000.00 for “tools of trade” are exempt.
7. Any alimony payments are exempt.

This is not an exhaustive list of exemptions, contact a bankruptcy attorney to discuss the full extent of your ability to protect yourself from your creditors. However, it’s safe to say that the Bankruptcy Court will generally not take the roof off your head, the clothes off your back, or the food off your table (and probably not the table itself). For many debtors, the extent of these exemptions may mean that, after the payment of administrative expenses, there is little or no money remaining to pay unsecured creditors before the debtor is awarded a fresh start on debt by the Bankruptcy Court.

Maginnis Law, PLLC is a Raleigh litigation law firm that also assists individuals with Chapter 7 Bankruptcy Code filings. Maginnis Law services the entire Triangle area, including Wake Forest, Rolesville, Leesville, Cary, and Apex. Contact the firm today at 919.526.0450 for a free initial consultation with a lawyer regarding your options if facing a significant debt or civil suits for breach of contract or collection on debt. Visit our website at for information regarding the firm’s services for business owners, including a Chapter 7 filing for LLC member-managers facing personal liability.