Bankruptcy

Can I Keep My Property If I File for Bankruptcy in New Jersey?

By Cara O'Neill, Attorney
Learn how to protect property in bankruptcy using New Jersey's bankruptcy exemptions.

August 25, 2017

Because the purpose of bankruptcy is to give individuals a fresh financial start, you don’t need to worry that you’ll lose everything if you file a New Jersey bankruptcy. You’ll be able to use New Jersey’s bankruptcy exemption statutes to protect property necessary to maintain a job and household, such as furniture, clothing, and your retirement account.

Exempting Property in a New Jersey Bankruptcy Case

One of the first steps in bankruptcy planning is reviewing New Jersey’s exempt property list and figuring out what you can protect. The bankruptcy chapter you file will determine what will happen to assets not covered by an exemption (called nonexempt property).

  • Chapter 7 bankruptcy. Most people choose this chapter if they meet qualification requirements because a filer doesn’t have to repay debt. Instead, the Chapter 7 bankruptcy trustee—the official responsible for your case—will sell the nonexempt property for the benefit of creditors.
  • Chapter 13 bankruptcy. This bankruptcy type requires a filer to pay any disposable income to creditors for three to five years. This structure allows a Chapter 13 bankruptcyfiler to keep nonexempt property and pay its value through the repayment plan.

Selecting the Federal or New Jersey Exemption Scheme

New Jersey allows residents to pick between two sets of exemptions: the New Jersey state exemptions and the federal exemptions. You must decide which scheme will work best for you, however, because you can’t mix and match exemptions. If you select the New Jersey state exemptions, you can supplement with the federal “nonbankruptcy” exemptions, as well.

New Jersey Bankruptcy Exemptions

Unless otherwise stated, references are to the New Jersey Statutes Annotated (N.J. Stat. Ann.). You’ll find the New Jersey statutes on the New Jersey Legislature site. (Locate “Laws and Constitution” in the left margin and click on “Statutes.”)

Homestead

New Jersey doesn’t offer a homestead exemption to protect home equity; however, in New Jersey, the equity in homes held as tenancy by the entirety is subject to the rights of the nonfiling spouse. A local bankruptcy attorney is in the best position to provide you with advice regarding equity protection. (11 U.S.C. § 522(b)(3)(8).)

Wages and Support

  • Wages—90% if less than $7,500. (N.J. Stat. Ann. § 2A:17:56.)
  • Military pay—100%. (N.J. Stat. Ann. § 38A:4-8.)

Household Furnishings, Jewelry, and Clothing

  • Clothing—100%. (N.J. Stat. Ann. § 2A:17:19.)
  • Household goods and furnishings—$1,000. (N.J. Stat. Ann. § 2A:26-4.)

Retirement Accounts, Pensions, and Other Benefits

  • Disability benefits (N.J. Stat. Ann. § 17:18-12.)
  • Teachers’ pensions (N.J. Stat. Ann. §§ 18A:66-51, 18:13-112.53.)
  • School employee pensions—certain counties. (N.J. Stat. Ann. §§ 18A:66-116, 18:5-80.)
  • Workers’ and unemployment compensation (N.J. Stat. Ann. §§ 34:15-29, 25:2-1, 43:21-53.)
  • Military disability and death benefits (N.J. Stat. Ann. § 38A:4-8.)
  • Judicial pensions (N.J. Stat. Ann. § 43:6A-41.)
  • Prison employee pensions (N.J. Stat. Ann. § 43:7-13.)
  • Alcohol control officer pensions (N.J. Stat. Ann. § 43:8A-20.)
  • City employee pensions—certain classes. (N.J. Stat. Ann. §§ 43:10-14, 43:13-9, 43:13-22.60.)
  • County workers pensions (N.J. Stat. Ann. §§ 43:10-18.22, 43:10-18.71.)
  • Probation officer pensions—certain counties. (N.J. Stat. Ann. § 43:10-57.)
  • Court interpreter pensions—certain counties. (N.J. Stat. Ann. § 43:10-105.)
  • Public, municipal, and village employee pensions (N.J. Stat. Ann. §§ 43:13-37.5, 43:13-44, 43:15A-53, 43:18-12, 43:19-17.)
  • Police and firefighter pensions (N.J. Stat. Ann. §§ 43:16-7, 43:16A-17, 53:5A-45.)
  • Assistance for the aged (N.J. Stat. Ann. § 44.7-35.)

Insurance

  • Life insurance proceeds with a clause prohibiting payment to creditors (N.J. Stat. Ann. § 17B:24-6.)
  • Annuity proceeds—$500 per month. (N.J. Stat. Ann. § 17B:24-7.)
  • Health and disability insurance proceeds (N.J. Stat. Ann. § 17B:24-8.)
  • Group life insurance proceeds (N.J. Stat. Ann. § 17B:24-9.)

Miscellaneous

  • Fraternal benefit society benefits (N.J. Stat. Ann. § 17:44B-1.)
  • Some partnership property (N.J. Stat. Ann. § 42:1A-11.)
  • Crime victim compensation (N.J. Stat. Ann. § 52:4B-18.)
  • Burial plots (N.J. Stat. Ann. §§ 8A:5-9, 8A:5-10, 8A:5-11.)

Wildcard

  • Wildcard—$1,000 of any personal property (anything other than real estate). (N.J. Stat. Ann. § 2A:17:19.)

Avoiding an Unanticipated Loss of Property

This list of New Jersey exemptions is not exhaustive, and explaining the application of each is beyond the scope of this article. You must independently verify your exemption qualifications because:

  • your situation is unique
  • additional exemptions exist
  • exemptions can change
  • you must meet all conditions listed in the statute, and
  • you risk losing property if you fail to exempt it correctly.

While it’s possible to prepare your own case after careful research, it’s prudent to utilize the services of a local bankruptcy lawyer.

Questions for Your Attorney

  • How much nonexempt property do I own, if any?
  • Would Chapter 7 or Chapter 13 bankruptcy suit my situation?
  • What will happen to my assets if I don’t file for bankruptcy?
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