What Constitutes a Household Good in Bankruptcy?

NC General Statute 1C-1601(a)(4) provides that a debtor may retain, free of the enforcement of the claims of creditors, the debtor’s aggregate interest up to $5,000 in value plus $1,000 for each dependent of the debtor not to exceed $4,000 for dependents in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments that are held primarily for the personal, family, or household use of the debtor, or a dependent of the debtor. The amounts would be different for a married couple filing a joint bankruptcy.

This statute applies in bankruptcy cases where the debtor is claiming the North Carolina exemptions. If the debtor has not lived in North Carolina for at least 730 days then a different set of exemptions may be claimed. In Chapter 7 bankruptcy, there is the potential for the debtor to lose assets. In Chapter 11 bankruptcy and Chapter 13 bankruptcy, the debtor is permitted to retain all assets, even if not exempt.

In the 4th circuit (where North Carolina is located), the case frequently cited for purposes of determining the sort of items that can be claimed through the household goods exemption is In re McGreevy. This case adopted the functional nexus test and provides that an item qualifies as a household good when it is used to support and facilitate daily life within the house. Pots and pans serve that function, but a model car collection does not.

In addition to the household goods exemption, North Carolina provides other exemptions for tangible items of personal property which may be utilized to exempt household goods.