Charlotte Bankruptcy Blog

Posts containing useful information for anyone considering a North Carolina bankruptcy lawyer.

The North Carolina Homestead Exemption

Most people who call me about filing a bankruptcy in Charlotte want to know what will happen to their home if they file. Fortunately, the answer is usually a good one. North Carolina has something called a Homestead Exemption which protects some or all of the equity in your home.

For instance, if you are a homeowner filing separately, you can protect up to $35,000 in equity in your home. If you are married and filing for bankruptcy jointly, you can typically protect twice that, or $70,000. By way of example, if you own a home valued at $300,000, with a mortgage of $250,000 you can still file bankruptcy while keeping the home. This is great news to clients who want to stay in their home but eliminate medical bills, credit card debt and other types of debt which are discharged when you file a Chapter 7 bankruptcy.

In a Chapter 13 bankruptcy, you can typically keep your home even if your equity exceeds the $35,000/$70,000 exemption limits. Depending upon the equity that exists beyond the NC Homestead Exemption, your attorney can help you determine your monthly payment under a Chapter 13 bankruptcy, which would eliminate unsecured debt (credit cards, etc) while allowing you to keep the home.

If the options begin to sound complicated, that’s OK. Your Charlotte bankruptcy lawyer can easily walk you through them and help you decide the best option for you and your family. Call me today for a free phone consultation at 704.749.7747.

One misconception about bankruptcy is that you cannot go through a Chapter 7  bankruptcy or a Chapter 13 bankruptcy and keep your home. Generally, provided the home does not have significant equity, this is simply not true.

The filing of a Bankruptcy petition will put an immediate stay on foreclosure proceedings. This stay remains in effect until the secured mortgage holder is granted permission by the court to continue with the foreclosure, or until the Bankruptcy case is closed or dismissed. The stay on foreclosure created by the Bankruptcy can provide the necessary time the homeowner needs to sell the property or cure the default on the mortgage.

As an alternative to using the filing of a Bankruptcy petition to simply buy time, an individual can move forward with a Chapter 13 Bankruptcy plan that includes the home and accompanying mortgage(s), and allows the borrower to cure the default over the course of carrying out the Bankruptcy plan. In other words, the mortgage lender is treated similarly to other creditors in the plan, and once the final plan payments have been made and a discharge granted, the borrower is no longer facing foreclosure and remains in the home.

Second mortgages are given special treatment in Chapter 13 Bankruptcy. In circumstances where more money is owed on the first mortgage than the home is worth, the second mortgage can often be treated as an unsecured creditor. The effect of this treatment is that, like other unsecured creditors (credit card companies, etc), once the debtor completes the plan and receives a discharge, the second mortgage is extinguished. The homeowner remains in the home, continues paying on the first mortgage, and the second mortgage is “stripped off” of the property and discharged along with other unsecured debt.