Property You Can Keep When Filing For Chapter 7 Bankruptcy
When filing for a chapter 7 bankruptcy, it is important to know what property you can keep. This property is called "exempt". The bankruptcy code recognizes the needs of individuals and provides for exemptions. New Jersey allows you to choose between the set of state exemptions and federal exemptions. We typically recommend using the federal exemptions because they provide for a larger amount of exempt property than the New Jersey set. If you are married and filing jointly, the amount of the federal exemptions doubles.
Your property will be listed on the bankruptcy petition. It will include a description of the property, the market value, and the law authorizing the exemption of the property. As soon as your bankruptcy petition is filed, all your property becomes part of the "bankruptcy estate". The trustee, however, will not take physical possession of your property during this time. Additionally, your creditors have 30 days after the meeting of creditors to object to any exemptions on your petition. The burden falls on your creditors to prove that you have improperly claimed the exemption.
1. Your Home
New Jersey does not have a homestead exemption. This means that your property is not exempt from attachment by creditors. If you have too much equity in your property, there will be a forced sale. The federal exemptions allow individuals to exempt $20,200 for real property (including co-op and mobile home) and $40,400 for joint (husband and wife).
We will recommend that you obtain an appraisal to determine how much equity you have in the property (if you do proceed with the filing, the bankruptcy trustee will require a recent appraisal to determine the value of the property). If you have more equity than allowed by the federal exemptions, we recommend that you choose an alternative to a chapter 7 bankruptcy unless you do not have an intention to keep the property. A chapter 13 bankruptcy will be an option you can explore.
2. Your Car
By looking at the Federal Exemptions listed below, you will see that it allows you to retain a car that is worth up to $3225. This does not necessarily mean that you will have to give up a car that is valued at more than this amount. This is because the Federal Exemptions also allow for a wildcard exemption of $1075 and $10,125 of unused homestead exemption. Therefore, if you do not own a home, you can exempt a car that is valued up to $14,425. If you have multiples cars, you can split this amount amongst those cars.
If you are still making payments on a car or leasing a car, the above exemptions do not apply. On your bankruptcy petition, you can list whether your intention is to keep the car or give it back. If you decide to keep the car, your lender will prepare a reaffirmation agreement which will be signed by you and approved by the bankruptcy judge. This reaffirmation agreement is between you and the lender and it states that you will continue to make payments. On this reaffirmation agreement, you must specify your income and expenses to convince the judge that you will be able to afford making the payments post-bankruptcy. If you cannot afford to make the payments, the agreement will not be approved.
3. Other Assets
There are also exemptions for household goods and furnishings, retirement funds, clothing, jewelry, etc. Below is a list of the federal exemptions and of the New Jersey state exemptions.
A. Federal Exemptions
Homestead:
522(d)(1) Real property, including mobile homes and co-ops, or burial plots up to $20,200. Unused portion of homestead, up to $10,125, may be used for other property.
Personal Property:
522(d)(2) - Motor vehicle up to $3,225.
522(d)(3) - Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $525 per item, and up to $10,775 total.
522(d)(4) - Jewelry up to $1,350.
522(d)(5) - $1,075 of any property, and unused portion of homestead up to $10,125.
522(d)(9) - Health aids.
522(d)(11)(B) - Wrongful death recovery for person you depended upon.
522(d)(11)(D) - Personal injury recovery up to $20,200 except for pain and suffering or for pecuniary loss.
522(d)(11)(E) - Lost earnings payments.
Pensions:
522(b)(3)(C) - Tax exempt retirement accounts; IRAs and Roth IRAs up to $1,095,000 per person.
Public Benefits:
522(d)(10)(A) - Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.
522(d)(11)(A) - Crime victim’s compensation
Tools of Trade:
522(d)(6) - Implements, books and tools of trade, up to $2,025.
Alimony and Child Support:
522(d)(10)(D) - Alimony and child support needed for support
Insurance:
522(d)(7) - Unmatured life insurance policy except credit insurance.
522(d)(8) - Life insurance policy with loan value up to $10,775.
522(d)(10)( C ) - Disability, unemployment or illness benefits
522(d)(11)( C ) - Life insurance payments for a person you depended on, which you need for support
B. New Jersey Exemptions
Personal Property:
2A:17-19 - Clothing; goods, personal property, and stock or interest in corporations up to $1,000 total.
2A:26-4 - Household good and furniture up to $1,000.
45:27-21 - Burial plots.
Wages:
2A:17-56 - 90% of earned but unpaid wages if your annual income is less than 250 percent of the federal poverty level. If income is higher, 75%.
38A:4-8 Military personnel wages and allowances.
Pensions:
11 U.S.C. § 522 - Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000 per person.
A:9-57.6 - Civil defense workers.
18A:66-51 - Teachers.
18A:66-116 - School district employees.
25:2-1 - Trust containing personal property if it was created pursuant to federal tax law.
43:6A-41 - Judges.
43:7-13 - Prison employees.
43:8A-20 - Alcohol beverage control officers.
43:10-57 & 43:10-105 - County employees.
43:13-9 - City workers' ERISA-qualified benefits.
43:13-44 - Municipal employees.
43:15A-53 - Public employees.
43:16-7 & 43:16A-17 - Police officers, firefighters, and traffic officers.
43:18-12 - City boards of health employees.
43:19-17 - Street and water department employees.
53:5A-45 - State police.
Public Benefits:
34:15-29 - Workers' compensation.
43:21-53 - Unemployment compensation.
44:7-35 - Old-age, permanent disability assistance.
Insurance:
A:9-57.6 - Civil defense workers' disability, death, medical or hospital benefits.
17:18-12 & 17B:24-8 - Health and disability benefits.
17B:24-6b - Life insurance proceeds, dividends, interest, loan, cash, or surrender value, if not the insured.
17B:24-7 - Annuity contract proceeds up to $500 per month.
17B:24-9 - Group life or health policy or proceeds.
17B:24-10 - Life insurance proceeds if policy prohibits use to pay creditors.
38A:4-8 - Military member disability or death benefits.
Your property will be listed on the bankruptcy petition. It will include a description of the property, the market value, and the law authorizing the exemption of the property. As soon as your bankruptcy petition is filed, all your property becomes part of the "bankruptcy estate". The trustee, however, will not take physical possession of your property during this time. Additionally, your creditors have 30 days after the meeting of creditors to object to any exemptions on your petition. The burden falls on your creditors to prove that you have improperly claimed the exemption.
1. Your Home
New Jersey does not have a homestead exemption. This means that your property is not exempt from attachment by creditors. If you have too much equity in your property, there will be a forced sale. The federal exemptions allow individuals to exempt $20,200 for real property (including co-op and mobile home) and $40,400 for joint (husband and wife).
We will recommend that you obtain an appraisal to determine how much equity you have in the property (if you do proceed with the filing, the bankruptcy trustee will require a recent appraisal to determine the value of the property). If you have more equity than allowed by the federal exemptions, we recommend that you choose an alternative to a chapter 7 bankruptcy unless you do not have an intention to keep the property. A chapter 13 bankruptcy will be an option you can explore.
2. Your Car
By looking at the Federal Exemptions listed below, you will see that it allows you to retain a car that is worth up to $3225. This does not necessarily mean that you will have to give up a car that is valued at more than this amount. This is because the Federal Exemptions also allow for a wildcard exemption of $1075 and $10,125 of unused homestead exemption. Therefore, if you do not own a home, you can exempt a car that is valued up to $14,425. If you have multiples cars, you can split this amount amongst those cars.
If you are still making payments on a car or leasing a car, the above exemptions do not apply. On your bankruptcy petition, you can list whether your intention is to keep the car or give it back. If you decide to keep the car, your lender will prepare a reaffirmation agreement which will be signed by you and approved by the bankruptcy judge. This reaffirmation agreement is between you and the lender and it states that you will continue to make payments. On this reaffirmation agreement, you must specify your income and expenses to convince the judge that you will be able to afford making the payments post-bankruptcy. If you cannot afford to make the payments, the agreement will not be approved.
3. Other Assets
There are also exemptions for household goods and furnishings, retirement funds, clothing, jewelry, etc. Below is a list of the federal exemptions and of the New Jersey state exemptions.
A. Federal Exemptions
Homestead:
522(d)(1) Real property, including mobile homes and co-ops, or burial plots up to $20,200. Unused portion of homestead, up to $10,125, may be used for other property.
Personal Property:
522(d)(2) - Motor vehicle up to $3,225.
522(d)(3) - Animals, crops, clothing, appliances and furnishings, books, household goods, and musical instruments up to $525 per item, and up to $10,775 total.
522(d)(4) - Jewelry up to $1,350.
522(d)(5) - $1,075 of any property, and unused portion of homestead up to $10,125.
522(d)(9) - Health aids.
522(d)(11)(B) - Wrongful death recovery for person you depended upon.
522(d)(11)(D) - Personal injury recovery up to $20,200 except for pain and suffering or for pecuniary loss.
522(d)(11)(E) - Lost earnings payments.
Pensions:
522(b)(3)(C) - Tax exempt retirement accounts; IRAs and Roth IRAs up to $1,095,000 per person.
Public Benefits:
522(d)(10)(A) - Public assistance, Social Security, Veteran’s benefits, Unemployment Compensation.
522(d)(11)(A) - Crime victim’s compensation
Tools of Trade:
522(d)(6) - Implements, books and tools of trade, up to $2,025.
Alimony and Child Support:
522(d)(10)(D) - Alimony and child support needed for support
Insurance:
522(d)(7) - Unmatured life insurance policy except credit insurance.
522(d)(8) - Life insurance policy with loan value up to $10,775.
522(d)(10)( C ) - Disability, unemployment or illness benefits
522(d)(11)( C ) - Life insurance payments for a person you depended on, which you need for support
B. New Jersey Exemptions
Personal Property:
2A:17-19 - Clothing; goods, personal property, and stock or interest in corporations up to $1,000 total.
2A:26-4 - Household good and furniture up to $1,000.
45:27-21 - Burial plots.
Wages:
2A:17-56 - 90% of earned but unpaid wages if your annual income is less than 250 percent of the federal poverty level. If income is higher, 75%.
38A:4-8 Military personnel wages and allowances.
Pensions:
11 U.S.C. § 522 - Tax exempt retirement accounts; Traditional and Roth IRAs up to $1,095,000 per person.
A:9-57.6 - Civil defense workers.
18A:66-51 - Teachers.
18A:66-116 - School district employees.
25:2-1 - Trust containing personal property if it was created pursuant to federal tax law.
43:6A-41 - Judges.
43:7-13 - Prison employees.
43:8A-20 - Alcohol beverage control officers.
43:10-57 & 43:10-105 - County employees.
43:13-9 - City workers' ERISA-qualified benefits.
43:13-44 - Municipal employees.
43:15A-53 - Public employees.
43:16-7 & 43:16A-17 - Police officers, firefighters, and traffic officers.
43:18-12 - City boards of health employees.
43:19-17 - Street and water department employees.
53:5A-45 - State police.
Public Benefits:
34:15-29 - Workers' compensation.
43:21-53 - Unemployment compensation.
44:7-35 - Old-age, permanent disability assistance.
Insurance:
A:9-57.6 - Civil defense workers' disability, death, medical or hospital benefits.
17:18-12 & 17B:24-8 - Health and disability benefits.
17B:24-6b - Life insurance proceeds, dividends, interest, loan, cash, or surrender value, if not the insured.
17B:24-7 - Annuity contract proceeds up to $500 per month.
17B:24-9 - Group life or health policy or proceeds.
17B:24-10 - Life insurance proceeds if policy prohibits use to pay creditors.
38A:4-8 - Military member disability or death benefits.
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