An
exemption is a dollar amount of certain types of property that a borrower’s
allowed to keep when being sued by his creditors and are trying to get their
money, or when he files a bankruptcy. These amounts can be very important in
determining whether you file bankruptcy, what will happen if you do, and which
type you should file.
Each state has different exemptions. They’re listed in the State’s code of
laws. Think of them as a safety net for things you’re allowed to keep, no
matter how bad things get, although it’s not all that simple.
To understand them, you must understand the collection process. To use a simple
example, a borrower has a creditor he owes money. If he doesn’t pay, and the creditor
does nothing, then it’s merely the creditor’s word against theirs. However, if
the creditor sues you, or takes the dispute to court, then the creditor’s
asking a judge to say that you owe money to them. If the judge sides with the
creditor, then he’ll sign a court order (a judgment) saying the borrower
definitely owes a certain amount of money.
A judgment collects interest each year for as long as it is alive. In NC and SC,
judgments exist for 10 years from the date they’re entered or filed at the
courthouse, and then expire. In NC, they last for 10 years but can be renewed
for 10 more. Actually, a borrower could get a judgment against him in NC for 20
years and THEN it could be moved to SC and be alive for another 10 years, for a
total of 30 years! Judgments are liens on any real estate in the county in
which they are filed. They can be moved to and from counties, states, and/ or
countries during their existence. We can avoid judgments and the judgment liens
in bankruptcy.
You want a judgment if you’re a creditor because you can then use it as a tool
to collect your money. In some states you can take a person’s wages. This is
called garnishment. You can garnish wages in NC, but it’s a complicated process
and isn’t done very often. Wages are regularly garnished in NC for back child
support, taxes, student loans and other debts owed by you to the government. There
is no garnishment in SC except for taxes and child support.
Creditors
also can get the sheriff to sell land or houses if they have a judgment filed
against you. If the borrower has cars, bank accounts, or other valuable
property, someone who has a judgment against the borrower can have these items
seized and sold by the sheriff. Money and cash, including checking accounts holding
your paychecks and money to pay living expenses, gets seized regularly in this
area of NC. These actions are called executing a judgment. Bankruptcy
immediately prevents these actions from happening.
Creditors can also bring special events if they have a judgment. This is where
a creditor makes a person he has a judgment against him appear in front of a judge, testify and
prove what assets the borrower has so the creditor can see if it’s worth his
trouble to go after their assets.
Exemptions are important because they say what assets a creditor CANNOT take
from a debtor when attempting to collect a debt. They’re important in bankruptcy
because if a debtor files a Chapter 7 bankruptcy, the chapter 7 bankruptcy
trustee can’t sell any of the debtor’s assets which are listed as being exempt.
Normally, a debtor claims the exemptions of the state where he filed
bankruptcy. However, the new bankruptcy law, which took effect in October 2005,
complicates this in that a debtor now has to look back to where they’ve lived
for the 2 years previous to the filing date and, to oversimplify it, the debtor
must claim the exemptions of the state he lived in during that time if that
state’s exemptions are applicable.
The previous oversimplified statement is not exactly correct, and you want an
experienced attorney to clearly tell you what exemptions you may claim. A
common mistake made when they handle their own bankruptcies is that they don’t
claim any exemptions at all, allowing the chapter 7 bankruptcy trustee to take
everything the debtor owns and sell it, giving them nothing back from the sale
proceeds.
The following is a brief summary of SC and NC exemptions:
In
NC $18,500 of equity in a debtor’s residence can be protected. If the debtor is
married, then you can double that to $37,000. A widowed spouse can use the
deceased spouse’s exemption for the full $37,000 if the residence is titled in
both of their names. If a debtor doesn’t exempt more than $13,500 in equity
($27,000 for married couples), then he (they) can protect $5000 ($10,000 for
married couples) in equity in any other assets. This is called a wild card
exemption. Debtors can also protect $3500 of equity in a car, all cash value in
most family life insurance policies, and all value in ERISA-qualified
retirement plans (almost all are qualified) and IRA’s. Again, for a married
couple filing a joint bankruptcy, the exemptions double. These exemptions when
properly done by your attorney almost always adequately protect all assets of most
people filing bankruptcy. There are numerous other exemptions that Mr. Hardy
uses to protect your wages, money, bank accounts, tools of trade, medical
products, household goods, Social Security, workers comp and personal injury
settlements and other assets.
Mr. Hardy is very knowledgeable in this area
and has even had cases published where he has made and clarified law in this
area. A case is published so other attorneys and judges around the nation may
use the decision and opinion in written in the case to guide them on the
appropriate application of law. Very few of Mr. Hardy’s clients lose any
property that they do not want to voluntarily surrender (such as a home or car
they do not want to pay for). And, very few lose any property at all. This is
one of the most important areas of bankruptcy law where you need an attorney
like Mr. Hardy who has the experience (20 years) and proven ability (thousands
of cases and published work).
A SC debtor may protect $50,000 (as of 5/06) of equity in his residence or
$1000 cash. They can also protect $1200 of equity in one car, all of his ERISA
-qualified retirement plan and IRA’s, all life insurance’s cash value (in most
situations), $2500 of equity in ordinary household goods, and $750 of tools of
trade. This is only for one person, so married couples filing bankruptcy can
protect doubly. It’s obvious that most people’s assets would be well protected.
A major difference in the non-bankruptcy use of exemptions in NC and SC is
that, in SC you have the exemptions as a matter of right. This means that if
someone sues you, gets a judgment and tries to collect it, then the sheriff
can’t sell your exempt property. HOWEVER, In NC you’re sent a notice to
CLAIM your exemptions which looks like any other legal paper to most people. If
you DON’T fill out the form in a timely fashion, YOU DON’T HAVE ANY EXEMPTIONS.
This makes for a very costly mistake. We assist people in filling out these
exemption forms and filings. Also, if you missed the deadline to file for your NC
exemptions, then you can file a bankruptcy to protect your assets because Mr.
Hardy can then renew your exemptions.
