Choosing between the Federal and State Bankruptcy Exemptions
Making the Right Decision in a New Jersey Chapter 7 Bankruptcy Filing
When you qualify to file for protection under Chapter 7 of the American bankruptcy laws, you’ll have the right to permanently rid yourself of many of your debts. In exchange, though, you’ll be required to relinquish some of your assets to the bankruptcy court. The court will then sell those assets and distribute the proceeds to your creditors. Under both state and federal laws, however, there are property exemptions that can be claimed in a Chapter 7 petition. In New Jersey, you must choose either the federal or the state exemption—you cannot mix and match from the two.
The Differences between the State and Federal Bankruptcy Exemptions in New Jersey
The bankruptcy exemptions cover virtually all types of real and personal property:
- Your residence—Under federal law, you can exempt up to $27,900 for a single filer and $55,800 for couples who jointly own property. New Jersey does not have any type of homestead exemption in Chapter 7.
- Motor vehicles—The federal exemption for cars, trucks and motorcycles is currently $4,450. New Jersey law does not allow any exemption for a motor vehicle.
- Tools of the trade—Federal bankruptcy law allows up to $2,800 in tools to be exempt from the bankruptcy estate. New Jersey has no comparable exemption.
- Personal property—Federal law allows exemption of up to $14,875 in personal property (maximum of $700 per item). New Jersey allows up to $1,000 for furniture and household goods, as well as an exemption for all clothing.
- Personal injury awards—The federal exemptions cover up to $27,900 in personal injury settlements or verdicts. New Jersey has no similar exemption.
- Wildcard exemption—Federal law allows an additional $1,475 to be applied to any property, as well as any unused homestead exemption not exceeding $13,950. New Jersey allows only the $1,000 personal property exemption.
Contact Attorney Howard N. Sobel
At the office of Howard N. Sobel, we provide personal bankruptcy counsel to men and women throughout the state of New Jersey. Contact our office online or call us at 856-424-6400 to set up a free initial consultation. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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