If I file Bankruptcy will the Court take all my property?
One of the biggest misconceptions about bankruptcy is the concern that the Bankruptcy Trustee will take all their property. Generally speaking, the Bankruptcy Court doesn’t want your dusty old couch in the kid’s playroom or your favorite Mickey Mouse t-shirt. In fact, assuming that you’ve lived in North Carolina for over two (2) years, it is very likely that the Bankruptcy Court won’t be able to take ANY of your belongings. When someone files bankruptcy, they are allowed to “exempt” certain property and belongings; by “exempting” property, the debtor is allowed to keep the property and it won’t be taken away by filing bankruptcy.
The logical follow-up question is, “Well, what property can I exempt?”
My answer to prospective clients is simple: North Carolina’s laws protect “normal” lifestyles. Therefore, is it normal for someone to have average furniture in their house? Is it normal for someone to have a new automobile that’s paid off? Is it normal to have a retirement account? Is it normal to have a house with a mortgage on it, with a fair amount of equity in it? The answer to all these questions is “yes”. And accordingly, the laws in North Carolina generally state that you can file bankruptcy and keep all these things. In essence, it’s a normal life and North Carolina protects normal lifestyles.
Conversely, North Carolina’s exemption laws don’t protect luxury, which I define as properties and belongings that are not normal. For instance, is it normal for someone to have an entire household of antique furniture and Picasso paintings? Is it normal to have a 2012 BMW paid off? Is it normal to have a house or beach condo that’s completely paid off? Is it normal to have your yacht docked up at Lake Norman? Of course not! And North Carolina law doesn’t attempt to protect property that isn’t normal; it doesn’t protect luxury.
For the vast majority of prospective clients, their lives are simply normal. They have a normal life and normal stuff. While all this is ‘generally speaking’ and deserves a more in depth conversation with an attorney, many individuals who file bankruptcy as a means to relieve their debt issue do not lose any property due to filing bankruptcy….except debt and stress.