Many New Jersey residents who are overwhelmed by debt want to file for bankruptcy liquidation. However, they might fear that they will have to surrender all of their property to pay their creditors. Fortunately, there are property exemptions for those who are eligible to file Chapter 7 bankruptcy. There are federal exemptions and state exemptions, and a filer may be able to choose between the two.
The main assets that most New Jersey residents are concerned about are their homes and automobiles. When it comes to a person’s home, a homestead exemption exists that might protect it from being subject to liquidation. As long as the individual does not possess more than the allowed amount of equity in the home, it may be protected. The amount of equity can vary from state to state, but the federal exemption is approximately $20,000. The same principal is used for an individual’s vehicle, but the allowed value is, obviously, much lower.
Personal property, such as clothes, jewelry and furniture, are often exempt as well. Once again, there is a maximum value allowed. There may also be a “catch all” exemption under which excess property, or property that does not fit into any other exemption, can be put.
Choosing between the federal and state exemptions depends on the property the filer owns when filing a Chapter 7 bankruptcy. For instance, a New Jersey homeowner would be forced to choose the federal exemption since the state of New Jersey does not offer a separate exemption. An attorney can best help a filer determine which set of exemptions would be more beneficial under the circumstances.
Source: FindLaw, “Bankruptcy Exemptions: Chapter 7“, Accessed on Dec. 12, 2015