In bankruptcy, a homestead exemption protects equity in your home. Although there's no homestead exemption in New Jersey, you can use the federal bankruptcy exemptions instead, which protect some home equity. Married couples can also protect their home from creditors of individual (but not joint) debts if the home is held as a tenancy by the entirety.
For information about how the homestead exemption works in both Chapter 7 and Chapter 13 bankruptcy, see The Homestead Exemption in Bankruptcy. For more articles on exemptions, see our Bankruptcy Exemptions area.
The New Jersey Homestead Exemption Amount
Under the New Jersey exemption system, there is no homestead exemption. However, a married debtor can exempt his or her survivorship interest in property held as tenants by the entirety with the debtor's spouse, but only to the extent of the debtor's individual debt. See below.
Doubling for Married Couples
Some states allow married debtors who file joint bankruptcy to double their exemptions; however, in New Jersey, only married debtors who hold property as tenants by the entirety have any homestead available, and only to the extent of debt they do not hold jointly.
The Scope of the New Jersey Homestead Exemption
In New Jersey, the homestead exemption applies to real property, including your home, if you own the home jointly with your spouse as tenants by the entirety. The exemption is limited to the amount of debt each debtor holds individually.
Can You Use the Federal Bankruptcy Exemptions in New Jersey?
In New Jersey, you can use either the state exemption system or the federal bankruptcy exemption system (but you can’t pick and choose different exemptions from each system – you have to use all state exemptions or all federal exemptions.)
The federal bankruptcy homestead exemption amount is $22,975. (This amount changes every three years. For the most recent figure, see The Federal Bankruptcy Exemptions.) The exemption may be used for homes, condos, co-ops, mobile homes, and burial plots. Married couples may double this exemption. You can find the federal bankruptcy homestead exemption at 11 U.S.C. §522(d)(1) and (5).
(To learn more about which state exemptions apply to you, see Which Exemptions Can You Use in Bankruptcy?)
In New Jersey, there is no homestead exemption except the protection offered to tenants by the entirety – you don’t have to file a homestead declaration in order to claim the homestead exemption in bankruptcy.
Real Property Held as Tenancy in the Entirety in New Jersey
If property is held as a tenancy in the entirety, it means the property is jointly owned by a married couple as a single marital entity, not as individuals. New Jersey law exempts a homestead held as tenants by the entirety as long as the debts are not joint debts. This might help if one spouse has lots of individual debts and files alone. It also might help outside of the bankruptcy context.
Finding the New Jersey Homestead Exemption Law
New Jersey's exemption law does not include a homestead exemption, but the case of Freda v. Commercial Trust Co. of New Jersey, 570 A.2d 409 (N.J. 1990), provides an exemption for married couples who own property as tenants by the entirety.
Learn more about What Happens to Your Property and Debts in Bankruptcy.