State Exemptions Versus Federal Exemptions in Chapter 7 Bankruptcy

When you file for Chapter 7 bankruptcy, you can protect certain assets by claiming them as exempt. Exempt property is property that you get to keep after bankruptcy. Non-exempt property is property the bankruptcy trustee can sell to pay back your creditors. An important decision that all bankruptcy filers must make is whether to use federal bankruptcy exemptions or state bankruptcy exemptions. Choosing between state and federal exemptions can be extremely complicated and requires a deep understanding of bankruptcy law. A Morris County Chapter 7 bankruptcy attorney has the knowledge and experience to help you determine which exemptions will best protect your assets.

Federal Bankruptcy Exemptions

Some states allow debtors to choose federal bankruptcy exemptions, which are outlined in the Bankruptcy Code. New Jersey is one of those states. Below are some of the assets you can protect using federal bankruptcy exemptions:

  • Homestead or burial plot, up to $21,625
  • One motor vehicle, up to $3,450
  • Household goods, appliances and furnishings, clothing, books, pets, crops, and musical instruments, up to $550 per item and up to $11,525 total
  • Jewelry, up to $1,450
  • Pensions and tax-exempt retirement accounts
  • Alimony and child support
  • Implements, books and tools used in business, up to $2,175
  • Public benefits such as workers’ compensation, public assistance, unemployment benefits, social security and veteran’s benefits
  • Wild card, up to $1,150, plus up to $10,825 of any unused portion of the homestead exemption (can be used for any property)

Married couples who file jointly are allowed to double the federal bankruptcy exemptions (e.g., they can exempt two vehicles up to $3,450 each, and their homestead exemption is capped at $43,250 if they own the home jointly). It is important to note that federal exemption amounts are updated periodically.

If you are considering Chapter 7 bankruptcy, a knowledgeable Morris County bankruptcy attorney can help you determine whether federal exemptions are right for you.

New Jersey Bankruptcy Exemptions

One of the biggest differences between federal and state exemptions in New Jersey is the homestead exemption — New Jersey does not have one. Even so, depending on the type and value of property you own, state bankruptcy exemptions may still be a better option for you. Below are some of the assets you can protect using New Jersey state exemptions:

  • Personal property and stock, up to $1,000
  • Household goods and furniture, up to $1,000
  • Burial plots
  • All clothing
  • All pensions
  • Earned but unpaid wages, up to a certain percent depending on your income
  • Workers’ compensation and unemployment benefits
  • Health and disability benefits

As with the federal bankruptcy exemptions, married couples who file jointly are allowed to double New Jersey exemptions. The bankruptcy court and trustee will look closely at your assets, so it is important to list all real and personal property in an accurate and detailed manner. An experienced Morris County Chapter 7 bankruptcy lawyer can help you value and exempt your assets properly.

To learn more about the entire bankruptcy process, contact a qualified Morris County bankruptcy lawyer today.



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