The party who wins a lawsuit can collect (or “execute") on the judgment awarded. "Execution" means that the winning party can ask a county sheriff to seize the losing party’s property or levy on the losing party’s bank account. North Carolina law, however, allows each losing party (known as a “judgment debtor") to keep a certain amount of money and property safe from judgment collection.
North Carolina’s safe amounts, known as exempt property or “exemptions" include the following:
- $35,000 in equity in a residence (or $60,000 if the residence was owned with a now-deceased spouse);
- To the extent that you do not use the $35,000 residence exemption, then up to $5,000 in equity in any property of whatever type;
- $3,500 in equity in any one vehicle;
- $5,000 in equity in household goods, plus $1,000 household goods for each dependent, up to a maximum additional amount of $4,000;
- $2,000 in equity in tools or equipment that are used in a business or trade;
- Health-related items, such as hospital beds, scooters, and the like;
- Certain investment property, including certain life insurance policies, certain retirement plans, and certain college savings plans;
- Money that comes from personal injury settlements, alimony, child support, TANF/Workfirst, workers’ compensation benefits, unemployment benefits, and sixty (60) days worth of your wages or earnings used to support the family.
When only one spouse is a judgment debtor, but both are owners of the residence, the residence may be entirely exempt. When the judgment debtor co-owns property with someone else, the judgment creditor may only execute on the non-exempt equity in the property. The judgment debtor or the co-owner should have an attorney review the lawsuit complaint and deeds or titles to any co-owned property to provide an opinion on whether it is exempt, and to what extent.
Important: you must assert your right to claim exempt property in order to keep it safe. Before it executes on the judgment, the winning party must send forms to the judgment debtor, entitled Notice of Right to Have Exemptions Designated and Motion to Claim Exempt Property. The judgment debtor should READ THE INSTRUCTIONS on the paperwork and follow them carefully.