Bankruptcy Liquidation Exemptions in New Jersey

When entering into liquidation bankruptcy, debtors might fear losing certain assets. While that is understandable, you can protect some assets using state or federal bankruptcy liquidation exemptions in New Jersey.

New Jersey does not have a homestead or a motor vehicle bankruptcy liquidation exemption. Debtors in New Jersey can protect certain personal property during Chapter 7 bankruptcy, such as clothing and some of their household goods and furnishings. There are state exemptions for certain disability benefits and miscellaneous exemptions that can protect assets like pensions, stocks, and life insurance proceeds. In order to protect the bulk of your assets, especially the ones that are the most important to you, you may benefit from using federal bankruptcy liquidation exemptions rather than state exemptions.

Reach out to Young, Marr, Mallis & Associates by calling our New Jersey bankruptcy attorneys at (609) 755-3115 and schedule a free case review today.

Does New Jersey Have a Homestead Bankruptcy Liquidation Exemption?

When discussing New Jersey’s bankruptcy liquidation exemptions, it is important to highlight the ones that the state notably lacks. For example, it is necessary that debtors are aware of New Jersey’s lack of a homestead exemption.

New Jersey does not provide any state exemptions that would or could protect your home from liquidation. When you file for Chapter 7 bankruptcy in New Jersey, you cannot exempt your home if you choose state exemptions.

Our Marlton, NJ bankruptcy attorneys can help you avoid such a situation by using federal exemptions. If you choose to use the federal homestead exemption, you can protect up to $27,900 of equity in your home from liquidation, which may be enough to avoid losing your house during bankruptcy.

Does New Jersey Have a Bankruptcy Liquidation Exemption for Motor Vehicles?

While many states have bankruptcy liquidation exemptions for motor vehicles, New Jersey does not. Again, this is a fairly unique approach on behalf of New Jersey and can make filing for Chapter 7 bankruptcy risky in some situations.

The biggest fear many debtors have is losing important assets, like their cars, through liquidation. Unfortunately, New Jersey does not have a state bankruptcy liquidation exemption for motor vehicles. This means your car will not be safeguarded from liquidation to pay back creditors unless you use certain federal exemptions instead.

Remember, New Jersey, unlike many states, allows debtors to use federal exemptions instead of state exemptions. Because of that, you may be able to take this route to prevent creditors from taking your vehicle to satisfy debts during Chapter 7 bankruptcy.

New Jersey’s Personal Property Bankruptcy Liquidation Exemptions

New Jersey does have bankruptcy liquidation exemptions for certain personal property. This can allow you to keep things with sentimental value and protect them from liquidation while you are under bankruptcy in New Jersey.

There is a state bankruptcy liquidation exemption that protects 100% of a debtor’s personal clothing from liquidation in New Jersey, according to N.J.S.A. § 2A:17-19. This means any expensive or sentimental clothing you might have does not have to be liquidated for you to back pay creditors.

N.J.S.A. § 2A:26-4 provides an exemption of up to $1,000 for debtors’ personal property of household goods and furnishings. There is a similar general personal property liquidation exemption that has the same threshold of up to $1,000 for filers.

Bankruptcy Liquidation Exemptions for Disability Benefits in New Jersey

Some debtors in New Jersey might receive disability benefits and fear that those benefits will be threatened if they file for bankruptcy. Fortunately, New Jersey does provide some exemptions that may protect such benefits.

All Workers’ Compensation insurance benefits are protected during Chapter 7 bankruptcy in New Jersey. The same can be said for disability or death benefits for military personnel or civil defense workers. According to N.J.S.A. § 17B:24-8, other insurance disability benefits cannot be garnished or otherwise used to compensate creditors in New Jersey.

Miscellaneous New Jersey Bankruptcy Liquidation Exemptions

There are many miscellaneous bankruptcy liquidation exemptions that debtors in New Jersey can use. This includes some of a debtor’s held stocks and interests in a corporation, and many types of pensions.

Wages are protected from garnishment up to a certain amount during bankruptcy New Jersey. According to N.J.S.A. § 2A:17-56(a), 90% of earned wages will be protected if a debtor earns under 250% of the poverty level. If a debtor earns about that amount, the court may allow a higher percentage of wages to be garnished.

Pensions are typically 100% exempt during Chapter 7 bankruptcy in New Jersey. This includes pensions for teachers, prison employees, city employees, county workers, probation officers, city employees, police officers, and others.

Crime victim compensation is also protected during Chapter 7 bankruptcy, meaning those funds do not have to be used to pay back creditors. Life insurance proceeds are also 100% exempt. Stocks and interest in a corporation are also protected, up to $1,000. There are other miscellaneous New Jersey exemptions that might benefit you, depending on your situation.

Should You Use Federal Bankruptcy Liquidation Exemptions Instead of New Jersey Exemptions?

New Jersey’s bankruptcy liquidation exemptions are sparse compared to some other states. Though they cover some property and assets, others are notably left out, which is why it often benefits debtors to use federal bankruptcy liquidation exemptions instead.

As a debtor in New Jersey, you can choose to use federal bankruptcy liquidation exemptions. Doing so can help you keep your home, motor vehicle, and other important property during bankruptcy, which are the assets many debtors care most about retaining.

You can’t pick and choose from state and federal exemptions. Debtors must decide which set of exemptions they want to benefit from and stick with them. Depending on your finances and the assets you want to retain, federal or state exemptions might be right for you.

Call Our Lawyers to Learn More About New Jersey’s Bankruptcy Liquidation Exemptions

Call Young, Marr, Mallis & Associates at (609) 755-3115 for a free and confidential case evaluation with our North Jersey bankruptcy attorneys today.