Bankruptcy laws are designed to pick you up, dust you off, and help you get back on your way towards your goals. To make that happen, the laws have a bunch of protections for you and your stuff. Why your stuff? Because you need them to live and be productive. The Bankruptcy Code and related laws recognize that you need a roof over your head, furniture and household items, transportation, tools of the trade for your job, and then pages of other things here and there that are essential to a person. The good news is that there are so many it would require a book to detail and do the subject justice. The bad news is that I don’t have the patience to write it and you probably don’t have the desire to read it. So, here is more of the summary and highlights.
A better tomorrow
The Code is even safeguarding your future and those of your loved ones. There are protections in place for many of the popular retirement accounts and life insurance policies. The list includes, “ERISA” type plans through a company/government like 401(k)’s, 403(b)’s, 457’s. Then you have individual plans like those with, “IRA” in the name. I mentioned loved ones, so that includes popular college savings such as the 529. While the following is a bit grim, life insurance can be one of the best options to keep helping your family when you are no longer able to. This might be a Term Life Policy or a Whole Life Policy. Side note: A big difference between the two is whether or not there is, “Cash Value.” Whole life has it, Term doesn’t, but that makes Term cheaper.
The unlikeliest of places?
If you peeked down at the reference links below you may have seen the North Carolina State Constitution. That document is one of the sources of protections for life insurance. The others were written into law or codified in The United States Code Title 11 section 522 and then each State also drafted their own versions, tailored to what they thought matched their needs. (Some States allow you to choose between the Federal and States ones, whichever helps you more. California got so carried away they wrote a pair, one more aimed for homeowners and the other for everyone else.) North Carolina has theirs available for view in the General Statutes Chapter 1C section 1601. Links below.
I was told there would be no math!
If you got bored enough to compare and contrast then you might notice that North Carolina provides more protections for homeowners too. A single person can protect up to $35,000 of equity, a married couple double that at $70,000, and it also looks out for widows with a protection of $60,000. The emphasis is on the word, “equity.” A fair way to calculate that would be, “How much might your house sell right now, in this market, and as-is?” Then subtract your mortgage balance. (I tend to have to check the statement my bank sends me at the end of each year for tax purposes.) When calculated this way the $35,000 is fairly generous, as it should be when it comes to a person’s home.
11 U.S. Code § 522.Exemptions
N.C.G.S. § 1C-1601
North Carolina State Constitution: Article X: Homesteads And Exemptions