Many New Jersey residents might hesitate to file for bankruptcy because they are concerned about losing their property. Fortunately, the U.S. Bankruptcy Code provides for filers to be able to keep certain property. Furthermore, if a filer wants to keep a piece of property that secures a debt listed in the bankruptcy, that might be possible as well.
It is not the intention of the Bankruptcy Code to leave filers homeless and without any property at all. For this reasons, there are certain exemptions written into the laws. States often have their own laws regarding what property filers can retain. A New Jersey resident can decide to use either the federal or state exemptions, but not both.
If a filer has property that is considered collateral for a debt — such as a car — a reaffirmation agreement might be possible. The creditor and the court will need to be notified of the intention to keep the property. In most cases, the terms of the reaffirmation agreement are the same as in the existing arrangement. Payments on assets that the filer wants to retain must be up-to-date prior to the agreement being approved by the court. This includes any property that is purchased within 180 days after the filing of the petition since it is considered to be part of the bankruptcy estate.
Understanding the laws regarding the retention of property can be complex. It would be in the best interest of anyone wanting to file for bankruptcy to consult with an attorney who routinely practices in this area of law. It is possible for filers to obtain a fresh financial start while keeping some, if not all, of their assets.
Source: The Huffington Post, “Some Bankruptcy Legal Facts and Suggestions“, Brad Reid, Feb. 3, 2016