Rachel Hunter, J.D. | Article

Exemptions in North Carolina

To collect on a judgment in North Carolina, a creditor is required to have the sheriff serve the debtor with two pieces of paper – one is a “Notice of Rights to Have Exemptions Designated” and the other is a “Motion to Claim Exempt Property.” These are very very important. If you receive this do not ignore it because if you do not claim your statutory exemptions by timely filing the motion with the court, then they are considered waived and even if your property would have been exempt otherwise, the statutory exemptions do not apply.

North Carolina’s exemptions also were crafted during the Civil War and North Carolina offers limited constitutional exemptions. Under the constitutional exemptions, a debtor can exempt $500 worth of personal property and a homestead exemption of $1,000. While this may have been considered a generous sum when the statutes were enacted, it is almost laughable today. The only reason why a debtor would choose the constitutional exemption is that the exemption can never be waived and can be asserted at any time prior to the seizure of property. So if you have failed to file your statutory exemptions, you at least can exempt the amount granted by the constitutional exemptions when the sheriff comes to seize your stuff. For a link to the North Carolina Constitution, go here: http://www.ncleg.net/Legislation/constitution/article10.html. The exemptions are found in Article 10 of the North Carolina Constitution and N.C.G.S. § 1C 1602.

The statutory exemptions are not limited to bankruptcy and are again more generous. For a complete listing, see N.C.G.S. § 1C 1601. Other exemptions not included in this list are a debtor’s earnings for the past 60 days. Retirement benefits, like IRAs and other ERISA qualified benefits may be exempt. However, non-ERISA qualified benefits like some 403(b) plans, while exempt in bankruptcy are not necessarily exempt by state law. Social Security, Veteran’s Benefits or any other federal benefit is also exempt.

When you receive the motion to claim exempt property, you have 20 days to fill it out and return it to the court. Just sending it to the lawyer for the creditor is not enough. It actually has to be filed with the court by the due date. You can then mail a copy of the filed exemptions to the creditor. While I recommend that debtors actually go to the courthouse and file this, if you mail it, make sure that the exemptions will be received by the court and docketed on or before the 20th day or else they will be deemed untimely.

If you are completely running out of time, don’t panic. North Carolina provides an alternate procedure for designating exemptions. A debtor can file a written request with the Clerk of Court requesting a hearing. The written request must be filed with the clerk on or before the 20th day. Upon receipt of the request, the clerk will arrange for a hearing and notify the debtor and creditor of the hearing date. The debtor must attend the hearing and can assert the statutory exemptions at that time.

Once the exemptions are filed with the court and sent to the creditor or the creditor’s attorney, the creditor has 10 days to object and file objections. If objections are filed, the clerk will schedule a hearing. If the debtor hears nothing, then objections were not filed. The clerk then designates whatever property is claimed by the debtor as exempt and a writ of execution issued. The exemptions will then be sent to the sheriff along with the writ. The sheriff will do a very limited asset search confined to the real estate and tax records. If the sheriff finds no assets that can be seized, the sheriff is going to contact the debtor to try and get the debtor to pay voluntarily. If the debtor has no funds, the debtor needs to convey that to the sheriff. The debtor is not obligated to pay or to even let the sheriff in the debtor’s home (unless the sheriff is evicting a homeowner after foreclosure or evicting a tenant from a rental the sheriff cannot enter a debtor’s home to collect on a judgment).

Writs of execution are good for 90 days. They expire after that but can be re-issued any number of times. If a creditor is going to do this, a creditor to wait a year or two before again attempting to collect as a debtor’s circumstances may have changed.

Some counties in North Carolina may follow the procedure whereby once the exemptions are designated they do not have to be re-filed in order for the creditor to collect. However, if a creditor wants to try to execute after the expiration of the initial execution, then the clerk may require the debtor to again be served with a notice of rights and motion to claim exempt property. The process is then repeated.

Copyright (c) 2012 by Rachel Lea Hunter

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