V. EXEMPTIONS IN REAL ESTATE
The debtor may exempt any interest in property in which the debtor had, immediately before the commencement of the case, an interest as a tenant by the entirety or joint tenant to the extent that such interest as a tenant by the entirety or joint tenant is exempt from process under applicable non-bankruptcy law. 11 U.S.C. § 522(b)(3)(B). Property of the estate is defined under Section 541 to include all legal or equitable interests of the debtor in property, including rents or profits of or from property of the estate and the debtor's interest in real property owned by the debtor and his or her spouse as tenants by the entirety. See In re Lyon, No. 11-50343, 2011 Bankr. LEXIS 4208 (Bankr. W.D.N.C. 2011); Chippenham Hosp., Inc. v. Bondurant (In re Bondurant), 716 F.2d 1057 (4th Cir. 1983). States have the ability to "opt out" of the federal exemption scheme and use those exemptions found under their constitutions or statutes. North Carolina is an "opt out" state, and debtors are restricted to using state exemption laws to protect their property. 11 U.S.C. § 522(b); N.C. Gen. Stat. § 1C-1601(f); In re Man, 428 B.R. 644, 652 (Bankr. M.D.N.C. 2010).
Section 522(b)(3) specifies how to determine which exemptions a debtor may claim. Debtors may claim only those exemptions available to them two years prior to the petition filing. See 11 U.S.C. § 522(b)(3)(A). If the debtor's domicile has not been located in a single state for the two-year period prior to filing, the domicile is then the place in which the debtor's domicile was located for 180 days immediately prior to the two-year period (i.e., 910 days pre-filing) or for the longer portion of such 180-day period than in any other place. See 11 U.S.C. § 522(b)(3)(A). If the debtor is not eligible for any exemption pursuant to the application of the domicile requirements of Section 522(b)(3), then the debtor may claim exemptions pursuant to Section 522(d) (e.g., debtor living overseas for large portion of the two-year period). See In re Connor, 419 B.R. 304 (Bankr. E.D.N.C. 2009) (debtor husband lived in North Carolina for two-year period prior to filing, while debtor wife initially lived in Florida for part of the two-year period and then moved to North Carolina before filing; thus, debtor wife could not claim North Carolina exemptions, but also could not claim Florida exemptions as Florida law required the claiming party to actually reside in Florida; court ruled that pursuant to 11 U.S.C. § 522(b)(1), debtor wife was required to claim federal exemptions, while debtor husband was required to claim North Carolina state exemptions).
Exemptions allowed to debtors are subject to restrictions in the instances of conversion of non-exempt property into residential property with mal-intent and for new acquisitions. 11 U.S.C. § 522(o) and (p). Exemptions claimed in residential property, residential property that is owned by a cooperative, burial plots, or homestead property are reduced to the extent that the value is attributable to any part of the property of which the debtor disposed in the 10-year period ending on the petition date if the debtor disposed of said property with intent to hinder, delay, or defraud a creditor and the debtor could not have otherwise exempted the property. 11 U.S.C. § 522(o). The residential property exemption is also capped at the aggregate value of $189,050 (subject to change by the Judicial Conference) if the property was acquired by the debtor within 1,215 days preceding the petition date (with exceptions for family farmers). 11 U.S.C. § 522(p).
A. Statutory Exemptions Pursuant to North Carolina Law
Exemptions are available only to individual — not corporate or business — debtors. 11 U.S.C. § 522(b). The North Carolina statutory exemption scheme was revised by amendment in 2005, with the revised exemptions and statutes being effective on January 1, 2006, and applicable to "judgments and bankruptcy petitions filed on or after" that date. N.C. Session Law 2005-401, s. 1. The North Carolina homestead exemption was further amended in 2009, with the revised exemption being effective as of December 1, 2009. N.C. Session Law 2009-417, s. 1. The North Carolina exemptions are limited by both the Constitution and the General Statutes to prevent the debtor from avoiding the lien of a laborer or mechanic for work done and performed for the debtor or on the premises. N.C. CONST. Art. X, § 3; N.C. Gen. Stat. § 1C-1601(e).
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