The amount of equity a debtor can protect in their North Carolina home is about to double. North Carolina law will soon allow a debtor in a bankruptcy proceeding to protect up to $35,000 of equity in their primary residence. How does this work? Under current law, if a North Carolina resident files bankruptcy with a home worth $100,000 and a mortgage of $75,000, they have $25,000 of equity in the home. Under current law an individual debtor can only protect up to $18,500 of equity in their home so the additional $6,500 of equity would be exposed and subject to liquidation by the trustee. Once House Bill 1058 becomes law, the entire $25,000 interest would be exempt because the homestead exemption will be raised to $35,000. A married couple filing jointly will be able to protect up to $70,000 of equity in their home.
House Bill 1058 – Effective December 1, 2009, an individual resident of North Carolina who is a debtor can retain, free from the enforcement of the claims of creditors, the debtor’s aggregate interest, not to exceed $35,000 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.