A bankruptcy exemption allows you to protect some of your property during bankruptcy. If you declare a Chapter 7 bankruptcy the trustee is usually allowed to sell off some of your property to pay off your debts. Exempt property isn’t touched.
An experienced bankruptcy lawyer can make good use of exemptions to protect what matters to you in a bankruptcy. There are both federal exemptions and state exemptions. New Jersey laws allow clients to choose the exemption set that is most beneficial to them.
New Jersey Exemptions
The New Jersey exemptions allow you to protect the following:
- Clothing and household goods, with no limits.
- Goods, chattels, stock shares, interests in any corporation, and personal property of every kid is exempted up to $1,000.
- New Jersey offers a $1,000 “wildcard” exemption that can be used to protect property or motor vehicles.
- A percentage of earned unpaid wages, depending on your annual income.
- $500 in annuity contract proceeds.
- Health and disability benefits
- Civil defense workers’ defense, disability, death, or medical benefits
- Life insurance proceeds if not the insured
- Group life or health policy or proceeds
- Life insurance proceeds if the policy prohibits its use to pay creditors
- Military member disability or death benefits
- Fraternal society benefits
- Workers compensation
- Unemployment compensation
- Disability assistance
- Crime victim’s compensation
- Specific pension protection for certain professions
- Trusts containing personal property if created under federal tax law.
The federal exemptions allow you to protect the following:
- Up to $27,900 in homestead exemptions; up to $13,950 of unused homestead exemptions may be used to protect other property. A married couple may exempt $55,800 in equity in a jointly owned property.
- Up to $4000 for a motor vehicle.
- $14,875 in clothing, animals, crops, appliances, furnishings, household goods, and musical instruments.
- A $1,475 “wildcard” exemption.
- Unmatured life insurance policies except for credit insurance
- Life insurance policy with loan values of up to $14,875
- Disability, unemployment, or illness benefits
- Life insurance payments on a person whom you depended upon for support.
- Most retirement accounts, up to $1,512,250.
- Profit sharing, money purchase, and defined benefit plans.
Which exemptions should you choose? Much depends on your specific, unique situation. If you’re relying on workers compensation benefits to pay your bills, for example, then you might well want to use the New Jersey exemptions. If protecting your home and retirement are most important then federal exemptions may be more beneficial. Keep in mind that Chapter 7 might not be the right solution for you; your attorney can help you decide if Chapter 13 might not be more beneficial.
Keep in mind that federal bankruptcy law requires adjustments to these figures every three years. You’ll want to consult with a bankruptcy lawyer to get the most recent figures. The next changes will be announced in March of 2025.
Choosing the right exemption set is yet another reason why nobody should try to file bankruptcy alone. Contact us to get your free consultation today.