New Jersey Bankruptcy Exemptions and Law
Key Takeaways
New Jersey residents can eliminate or reorganize their overwhelming debt under federal law. Debtors primarily file Chapter 7 liquidation to discharge unsecured liabilities or Chapter 13 to create a structured repayment plan. To qualify, individuals must pass an income means test, undergo credit counseling, and submit tax filings. Filers can protect assets by choosing either limited state exemptions or broader federal exemptions.
There are several types of bankruptcy, with the two most common being Chapter 7 and Chapter 13. Most bankruptcy attorneys call Chapter 7 a liquidation bankruptcy, while Chapter 13 is a reorganization bankruptcy.
In a Chapter 7 bankruptcy case, the debtor petitions the court to discharge unsecured debts, such as credit card or medical debt. If the person meets the eligibility requirements for Chapter 7, the court will likely approve the bankruptcy petition and, ultimately, discharge the debts. For a Chapter 13 bankruptcy case, the individual asks the court to discharge eligible unsecured debts after completing a payment plan.
This article explains how the bankruptcy laws work in New Jersey. It also examines the bankruptcy exemptions in the Garden State and whether you can claim them in your bankruptcy case.
If you’re considering bankruptcy or have already filed your petition, consider speaking with a New Jersey bankruptcy attorney. Not only will they ensure that you file your petition properly, but they’ll also make sure your bankruptcy trustee treats you fairly.
New Jersey Bankruptcy Law
For the most part, New Jersey’s bankruptcy laws mirror those of the federal government. To qualify for a Chapter 7 bankruptcy in New Jersey, you must demonstrate that your income is less than the state’s average median income for your household size. Otherwise, a “Means Test” will determine if you have insufficient disposable income.
New Jersey’s Chapter 13 eligibility requirements are the same as they are in most other states. As long as your debts fall under the federal limits and you can prove that you have a regular income, you may qualify to file a Chapter 13 bankruptcy petition.
One major departure from the federal bankruptcy laws is the amount of money a debtor can claim as an exemption. When a person files for bankruptcy, they can claim certain exemptions. These exemptions protect you from the sale of your assets in a Chapter 7 and help lower your monthly payment amounts in a Chapter 13. Understanding the available exemption amounts helps you decide whether to use New Jersey’s exemptions or those offered by the federal government.
General Requirements for Filing Bankruptcy
In addition to meeting the above criteria, there are other eligibility requirements. Before you file your bankruptcy petition, you must complete a mandatory credit counseling course. A copy of your certificate of completion must be attached to your petition.
You must also have filed your state and federal tax returns for the most recent year you file for bankruptcy. Your bankruptcy attorney must include a copy of these returns when they file your petition. Filing for bankruptcy can provide you with debt relief, but you must decide which chapter to file and complete the bankruptcy process before the court will discharge your debts under Chapter 7 or approve your Chapter 13 repayment plan.
New Jersey Bankruptcy Exemptions
Every state offers bankruptcy filers exemptions that they can use to protect their property when they file. These exemptions prevent the trustee from seizing your property, selling it, and distributing the proceeds to your creditors.
The United States Bankruptcy Code also offers people personal bankruptcy exemptions. Some federal exemptions are greater than those offered by the state. In other cases, state exemptions offer more protection than the federal bankruptcy laws.
Some state bankruptcy laws allow debtors to choose between federal and state exemptions. These jurisdictions are called “Dual Choice” states. Debtors choose whichever set of exemptions (federal or state) best fits their financial situation. New Jersey is one of these states.
While the bankruptcy exemptions in the Garden State are fair, they don’t include a homestead exemption. This exemption allows you to protect some or all of the equity in your primary residence. For this reason, debtors in New Jersey who own real estate tend to choose the federal exemptions.
Specific Exemptions in New Jersey
New Jersey bankruptcy laws don’t offer a homestead exemption or a motor vehicle exemption. They offer other opportunities, such as an unlimited clothing exemption.
The specific exemptions available in an NJ bankruptcy are as follows:
- Homestead exemption: None
- Automobile exemption: None
- Household goods/furniture: $1,000
- Clothing: No limit
- Tools of the trade: None
- Jewelry: None
- Wildcard: $1,000
The wildcard exemption can be applied to any type of real or personal property. In general, the federal exemptions offer more than New Jersey’s exemptions.
A New Jersey bankruptcy attorney can discuss how the exemptions work and help you decide which set of exemptions to claim in your case. When you submit your petition to the United States Bankruptcy Court, you must identify which set of exemptions you wish to apply to your case.
Federal Exemptions
New Jersey allows debtors to choose between the federal and state exemptions. Because federal exemptions are more generous, most debtors choose to use them.
Some of the key federal bankruptcy exemptions include the following:
- Homestead exemption: Federal law protects up to $31,575 of home equity per person. This means that a married couple can claim up to $63,150 under the federal homestead exemption.
- Motor vehicle equity: Under the federal set of exemptions, you can protect up to $5,025 of the equity in your motor vehicle. New Jersey does not offer any motor vehicle exemption.
- Personal property: You can protect up to $800 per item of personal property. The total federal personal property exemption is $16,850.
- Wildcard exemption: The federal exemptions allow you to claim up to a $1,675 wildcard exemption plus up to $15,800 of unused homestead protection. You can apply this to almost any type of property, including cash in a bank account, artwork, jewelry, fur coats, and other property that is otherwise a non-exempt asset.
If you file as a married couple, you can claim double the above amounts.
Other Exclusions
Some assets are protected in bankruptcy regardless of which state you live in or which set of exemptions you claim. For example, retirement accounts and pensions are excluded in bankruptcy. When you first visit the law office handling your bankruptcy case, ask them about other exemptions and what can be done to protect your nonexempt property.
Disclaimer: State and federal laws frequently change due to new legislation, higher court rulings, and other means. While FindLaw strives to provide the most current information, consult a local bankruptcy lawyer to verify the current bankruptcy laws in your state.
Seek Legal Advice for Your New Jersey Bankruptcy
If you’re filing for bankruptcy and worried about protecting your real and personal property, consider speaking with a New Jersey bankruptcy attorney. It’s a good idea to discuss your legal issues with a licensed attorney before filing a bankruptcy petition. They’ll help you select the best type of bankruptcy for your financial situation, make sure you take advantage of all possible exemptions, and help you deal with foreclosure or wage garnishment. A skilled attorney can help you achieve the fresh start you are looking for.
Frequently Asked Questions About New Jersey Bankruptcy
If you have a bankruptcy background and you are filing a no-asset Chapter 7, you probably don’t need a New Jersey bankruptcy lawyer. These cases are generally very straightforward, and the forms are available here.
If you are filing any other kind of bankruptcy and you don’t have a bankruptcy background, you probably need a bankruptcy lawyer. Pro se bankruptcies are simply too risky. As outlined above, the process is complex. Furthermore, if issues arise, and they almost inevitably do, pro se debtors are on their own against a posse of lawyers.
Bankruptcy filing fees, which are usually about $350, vary in different situations. A few judges allow installment payments or waive these fees if you meet certain qualifications. Professional fees vary as well, mostly depending on the type of bankruptcy. Payment plans, including post-petition payment plans, and sliding scales are almost always available for the asking.
The federal exemptions protect your house, car, personal property, retirement account, Social Security benefits, and many other assets. A bankruptcy lawyer can use some legal loopholes to maximize these exemptions.
The forms are available on the internet. Pro se debtors must complete all the forms and physically file them at a physical courthouse location.
Very carefully. Accidental mistakes often lead to bankruptcy fraud charges. If you have any doubts about how to fill out the forms, do yourself a favor and work with a New Jersey bankruptcy lawyer. Bankruptcy fraud charges are very easy to head off at the pass, but they are very difficult to defend in court.
New Jersey Bankruptcy Courts
Where To File:
New Jersey’s bankruptcy courts are located in Newark, Trenton, and Camden. Pro se debtors must conduct most or all of their business at a physical courthouse location. These locations have limited hours and services.
Your attorney may use the ECF (Electronic Case Filing) system to pay fees, file documents, do research, and perform other tasks.
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