Filing for Bankruptcy in New Jersey

New Jersey's Bankruptcy Exemption List

Here are some commonly used New Jersey bankruptcy exemptions.

New Jersey's Homestead Exemption

New Jersey is unusual because it doesn't offer a homestead exemption to protect a filer's equity in a residential home. You might want to consider using the modest homestead exemption available by selecting the federal exemptions.

Also, under bankruptcy law, the survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of the other spouse. (11 U.S.C. § 522(b)(3)(8)). Usually, it will protect real estate if one spouse files for bankruptcy, but not both. Because it can be tricky to apply, be sure to meet with an attorney.

New Jersey's Motor Vehicle Exemption

New Jersey doesn't offer a specific motor vehicle exemption. You can apply the $1,000 available for personal property to your vehicle's equity or consider using the motor vehicle exemption offered by the federal exemptions. However, keep in mind that you must choose one list or the other.

Exemptions Offered by New Jersey

• Cemeteries and burial funds. Cemetery property, lands held for burial purposes by a cemetery company, charitable, religious, or fraternal organization, and the trust funds and securities and income of any cemetery property. (N.J. Stat. Ann. §§ 8A:5-9, 8A:5-10, 8A:5-11.)
• Crime victims' compensation. Crime victims' compensation for expenses resulting from an injury claim. (N.J. Stat. Ann. § 52:4B-18.)
• Insurance benefits. Life insurance proceeds if policy prohibits proceeds from being used to pay creditors; life insurance proceeds in favor of a person other than the insured; up to $500 a month in annuity benefits, unless fraudulently obtained; proceeds of health insurance, disability provisions in life insurance contracts, and other disability benefits but not claims for necessities contracted for during the period of disability; proceeds of group life and group health insurance, but not claims for necessities contracted for during disability period. (N.J. Stat. Ann. § § 17:18-12, 17B:24-6, 17B:24-7, 17B:24-8, 17B:24-9.)
• Pension and retirement benefits. Public employees' pensions (N.J. Stat. Ann. § 43:15A-53); pensions for teachers, judiciary members, prison employees, alcohol control officers, city employees, county workers, probation officers, court interpreters, police officers, and firefighters (N.J. Stat. Ann. §§ 18A:66-51, 18:13-112.53, 18A:66-116, 18:5-80, 43:6A-41, 43:7-13, 43:8A-20, 43:10-14, 43:13-9, 43:13-22.60, 43:10-18.22, 43:10-18.71, 43:10-57, 43:10-105, 43:13-37.5, 43:13-44, 43:15A-53, 43:18-12, 43:19-17, 43:16-7, 43:16A-17, 53:5A-45.) Learn more about retirement accounts in bankruptcy.
• Personal property. Clothing; up to $1,000 in household goods and furnishings, pay and benefits owed to a debtor for participating in the state militia. (N.J. Stat. Ann. § § 2A:17-19, 2A:26-4, 38A:4-8).
• Public assistance. Aged assistance. (N.J. Stat. Ann. § 44:7-35.)
• Unemployment compensation. (N.J. Stat. Ann. § § 43:21-15, 43:21-53.)
• Wildcard exemption. Up to $1,000 of any personal property, stocks, or corporate interests. (N.J. Stat. Ann. § § 2A:17-19.)
• Workers' compensation. (N.J. Stat. Ann. § 34:15-29.)

The amounts in the New Jersey exemption list are adjusted periodically. To ensure that your figures are the most recent, check for updates on the New Jersey Legislature website. (Go to "Laws and Constitution" in the left navbar and select "Statutes.")

Preventing Bankruptcy Exemption Problems

Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Qualifying for Bankruptcy in New Jersey

If you've never filed for bankruptcy before, you'll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You'll also need to meet specific chapter qualifications.

You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Qualifying for Chapter 13 can be an expensive proposition because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

• your priority nondischargeable debt
• the value of nonexempt property, or
• your disposable income.

Find out more about calculating a Chapter 13 bankruptcy payment.